FW FOCUS: Franchise Relations
Working Together for Better Franchise Relations
Franchise Relations Committee steps up the pace of activities.
By Larry I. Tate
How do you define a good franchisor-franchisee relationship? In The
International Franchise Association Franchise Relations Committee we think of integrity,
honesty, respect, trust, financial success and commitment to excellence. And these
values need to be shared and mutual.
When I was a student at the University of Michigan Law School, we looked at
contracts that were drawn with the expectation that the business relationship might go
sour, so having punitive provisions was the key to assuring satisfactory relations
between the parties.
Today as a “reformed” lawyer, I now have a different view after 30 years as both
a franchisee and franchisor. In franchising I learned that productive business
relationships are formed based on mutual benefit, fairness and trust, not legal
documents. Those values are the cornerstones of both the IFA and the Franchise
Relations Committee.
Of course, contracts and lawyers are essential ingredients in the franchise
process, but it’s clear they can’t make a broken relationship work or even create a good
relationship. Legislative action and government regulation are cited by some as the
answer, but experience has shown that restrictions by the federal and state government
on business relationships are expensive to administer, raise operating costs, and they
stifle growth, creativity and innovation.
Educating Lawmakers
Franchisees and franchisors, testifying in 1999 on behalf of the IFA, took that
message to a hearing of a U.S. House of Representatives subcommittee that was
considering highly-restrictive legislative additions to regulations affecting franchise
relationships. Some members of the subcommittee were not aware of the extent of
existing Federal Trade Commission disclosure requirements. When it came my time to
testify, I held up and leafed through the 252-page Uniform Franchise Offering Circular
that Golden Corral had just filed. IFA-member franchisees testified about the workability
of the current processes in most franchise systems and the availability of legal
processes to right any wrongs. Through our combined efforts the legislative proposal
was dropped.
There may be other attempts in the future to impose restrictions and regulations
on our $1.5 trillion-dollar franchising business format. The only certain defense against
such threats is to establish and maintain positive and productive franchisor-franchisee
relationships that will increase the 18 million jobs franchising has already created.
The IFA Franchise Relations Committee is currently fostering productive
relationships by writing and publishing a series of best practices handbooks. The first
two, Best Practices in Communications and the Dispute Resolution Handbook, were
released during IFA’s 2004 Convention. The handbooks, which are written in down-toearth language by hands-on experts, were well received by convention participants.
Available at No Charge
Did I mention the handbooks are free? A task force composed of members of
the Franchise Relations Committee is designing a marketing plan to ensure that all IFA
members are aware of these valuable new management tools and how to obtain them.
One of the first steps by the marketing task force will be to work with the Certified
Franchise Executive (CFE) program of the IFA Education Foundation to integrate the
handbooks into their teaching curriculum.
In addition to the handbooks, the Franchise Relations Committee will continue to
explore important issues in workshops presented at IFA conventions. At the 2004
convention, our workshop session dealt with franchise transfers and succession
planning, issues that have challenged many IFA members in the past.
The best thing that could happen to the Franchise Relations Committee is that
we go out of business because relationships in all our franchise brands and systems are
so positive, mutually productive and satisfying.
My opinion is that franchise relationships in most systems generally are sound
and getting better each year because of the role IFA is playing in bringing franchisees
and franchisors together. But that doesn’t apply in every case. Each system’s
relationships must be judged on its own merits and I urge each IFA member to critically
assess their current system to identify areas where improvements can be made.
Criteria of Satisfaction
One way to evaluate the condition of existing franchise business relationships is
to apply the following 14 criteria measuring franchisee satisfaction that were developed
by an independent survey organization for a national business publication. The survey
asked franchisees to respond to the following statements, ranking each from one
(worst) to 10 (best) based upon their degree of satisfaction:
1.
You are very satisfied with your decision to buy your franchise.
2.
The franchise has given you the financial return you expected.
3.
You are very satisfied with the training you have received as a franchisee in
this system.
4.
The franchisor provides you with excellent on-site field support.
5.
You are very satisfied with the advertising, promotion and public-relations
support of the franchisor.
6.
You are very satisfied with the computerized operating system that the
franchisor makes available to you.
7.
The franchisor does a very good job of communicating with you through the
use of such telecommunications technology as your Web site and
videoconferencing.
8.
You are very satisfied with the frequency with which the franchisor updates
training programs and operational manuals to keep up with changes in your
system and the changing buying habits of your customers.
9.
You are very satisfied with the accessibility of executives of the parent
company.
10. You are very satisfied with the importance that the franchisor attaches to the
franchise advisory council’s recommendations and opinions.
11. You are very satisfied with your franchisor’s reward and recognition
programs for franchisees.
12. The franchisor has a very effective system to resolve franchisee complaints.
13. You are very satisfied with the financial health of your franchisor.
14. Knowing what you know now, you would buy one or more franchises in this
system again.
Te Acid Test
All the statements were important, but number 14 is the acid test. From the
franchisor’s perspective, if your franchisees would buy again, and can recommend your
system to their friends, you probably have very productive and positive relationships.
For franchisees, if your franchisor would get a perfect 10 score on all the statements
above, then you have a mutually positive business relationship. Our committee is
definitely dedicated to helping every system get a perfect 10.
The Franchise Relations Committee is also committed to increasing the
involvement of franchisees in our committee’s activities, with particular emphasis on the
best practices handbook series. Surveys, like the one I’ve just summarized, are
instructive, but nothing is as authoritative as the voice of a franchisee who is an active
participant in the Franchise Relations Committee and contributes to the overall strategic
plan of the IFA.
Larry Tate is senior vice president, franchising, Golden Corral Buffet & Grill. He
can be reached at 919-881-5135 or ltate@goldencorral.net.