May 07, 2012
Last week’s blog in this space explored some of the advantages of franchising a business. Lest would-be franchisors think that it’s all upside, and as simple as giving someone permission to use your brand’s name while you collect the royalty cheques, it is worth knowing what some of the many challenges to franchising can be.
Primarily, it’s all about control – or rather, the loss thereof. In licensing another individual the right to operate a business under its brand, a franchisor is entrusting that individual with maintaining the same quality of products and service which the brand was built on. That’s not always a seamless transition, as some franchisees may not share the vision the franchisor does, or may not be able to execute that vision with the same consistency that is so vital to successful franchising.
Franchisors need to be vigilant in their monitoring of franchisees within the system to try and enforce that vision and consistency which was always easier to oversee when the franchisor owned a small handful of businesses himself or herself. This becomes a larger obstacle as the franchise grows into territories beyond those where a franchisor can physically inspect the operations every single day.
Further, the franchise relationship is not always necessarily harmonious. Disputes are common and there is no blueprint on how to successfully manage them. In some cases, there is a breakdown in communication between franchisor and franchisee, the franchisor is wholly unsupportive or the franchisee has refused or is unable to meet its obligations under a franchise agreement.
At that point, difficult decisions like a sale or termination of the franchisee are on the table, both of which distract a franchisor from the day-to-day operations of the system.
Franchising is a proven method for successful brand expansion, but newcomers should be aware of the challenges they are likely to encounter.