The franchise relationship

Question 1

What are the realms of negotiation?

Answer 1

Franchisor and Franchisee
The negotiation between the franchisor and the franchisee. Negotiation of terms and conditions are rare due to a need for uniformity and equal terms for all members of the system.

Other Parties
The other is negotiation between the franchisee and other parties that deal with issues such as loans, The lower risk of failure provides favourable negotiating opportunities with lending institutions and landlords.

Question 2

When might negotiation opportunities between the franchisor and franchisee arise?

Answer 2

When the franchise system is still emerging.
Franchisors may be prepared to lower the franchise purchase price, or allow a larger territory in order to attract an initial set of franchisees.

Question 3

How might innovation arise in a franchise system?

Answer 3

From the work of the franchisor’s research
and development department

The observations and inspirations of franchisees

If the franchisee modifies the offerings of the franchise system to accommodate local preferences uniformity will be lost. However, unless there are mechanisms for good ideas of franchisees to be introduced system wide, opportunities will be lost.

Question 4

What are the usual stages of franchisee emotions?

Answer 4

There are 6 stages of franchisee emotions

1) Elation
2) Financial Blues
3) Blame
4) Prisoner
5) Clarity
6) Team Work

Question 5

What happens in the elation stage?

Answer 5

Everything is new, and the franchisee is full of hope and excitement. The realities of the day to day grind of running a successful business have not dawned on the franchisee at this stage.

Question 6

What happens in the financial blues stage?

Answer 6

The franchisee considers how much of their income is paid to the franchisor and become frustrated by by how much must be given to the franchisor given they are not working on the business.

Question 7

What happens in the blame stage?

Answer 7

The franchisor has learnt how to operate the business and will not be reliant upon the training and the high level of initial support from the franchisor.

Here, attribution theory is seen. If they are not realising their financial expectations they will blame the franchisor for having a poor system. If performance is good, they will attribute that to themselves and consider the franchisor unnecessary.

Possibility of conflict very high at this stage.

Question 8

What happens in the prisoner stage?

Answer 8

Once franchisees have become confident in running the franchise they sometimes go through a phase of being able to see possible improvements to service delivery system or the product mix but cannot break act given the strict procedure set out in the franchise system.

Question 9

What happens in the clarity stage?

Answer 9

The of a healthy relationship between the franchisee and the franchisor. It marks a level of maturity when the franchisee recognises the benefits of being in the franchise system and remembers why they decided to invest in a franchise rather than establish a stand-alone business

Question 10

What happens in the teamwork stage?

Answer 10

The reciprocity of the franchisor-franchisee relationship is fully realised. Each party values the others contributions and work together to achieve the best results for all involved.

Question 11

What happens if they linger in the troubled stages?

Answer 11

There will be discontent that can flow through to other
franchisees.

Obviously the individual franchisee, who might have invested a large proportion of their capital into the franchise, will be suffering, either emotionally, financially, or both.

Question 12

What can a franchisor do if a franchisee to prevent them getting stuck in a particular stage?

Answer 12

Appoint representatives or franchisee liaison
officers to work personally with franchisees. Those representatives need to be able to identify the phase that the franchisee is going through and provide them with appropriate support for that phase, whilst maintaining the integrity of the franchise system.

Question 13

What are the categories of stakeholders for a franchisor and franchisee relationship?

Answer 13

There are five categories of stakeholder:

1) the franchisor
2) the franchisee
3) employees of both the franchisor and franchisee
4) suppliers
5) customers.

Question 14

What are the responsibilities of the franchisor?

Answer 14

1) Accounting and finance
2) Health and Safety
3) Human Resources
4) Marketing
5) Information Technology

One area of the business operations often retained by franchisors relates to supply. This can be to negotiate beneficial terms of trade with suppliers for all
franchisees and it can be control of the whole distribution network.

Question 15

What are the responsibilities of the franchisee?

Answer 15

1) Franchise accounts
2) Human Resources
3) Promotion
4) Operations

Question 16

What responsibilities are often shared?

Answer 16

Some areas of responsibility, such as marketing, are conveniently split between the franchisor and franchisee. The franchisor will design the trademarks and look and feel of the franchise and the franchisee will form relationships with local organisations for sponsorship and promotion. Sometimes regional marketing will be used when, for example, there is
television, radio and/or print media that is broader than the territory of an individual franchisee, but not national

Question 17

What are the three elements of harmony?

Answer 17

1) Open communication
2) Shared Interests
3) Receptive environment.

Question 18

What is the secret of a good relationship between franchisers and franchisees?

Answer 18

Harmony.

In the business environment the lack of a
personal relationship does not necessarily equate to a poor relationship. If the franchisor has
systems in place for a 360 feedback loop through liaison officers, or committees comprised
of some franchisees and representatives of the franchisor, it may be that the franchisor and franchisee
relationship is strong, but not direct.