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The Laws of Franchising Remain Unchanged

by Ed Teixeira

In the franchise industry there are certain truisms which have remained virtually unchanged over the years. I refer to them as The Laws of Franchising. The following are six of these laws.

1. Franchisees Have More Power Than They Think.

Many franchisees feel that if they complain too often, the franchisor may react negatively. In the majority of cases, this couldn’t be further from the truth. Franchisees that provide reasonable criticism and suggestions to the franchisor are usually heard, particularly when the feedback comes from franchisees that follow the franchise program. This doesn’t mean that every franchisor will easily accept criticism, but most franchisors are willing to accept feedback and suggestions from their franchisees. Often time, a franchisor will accept suggestions from franchisees more readily than from their own staff. If suggestions and comments fall on deaf franchisor ears, then there are larger problems to worry about. Franchisees should recognize that they have more power than they think and should provide feedback to their franchisor.

2. Franchisees Should Relate To Successful Franchisees.

Fledging franchisees need to relate to successful franchisees. In many cases the successful franchisees are less visible, choosing to focus their time and attention on running their business. Many of these franchisees can provide valuable advice. The new franchisee should seek out successful franchisees and pay attention to how they operate their business. A new franchisee should be wary of those franchisees who only complain, unless there is validity to their complaints.

3. Franchisors Must Enforce Their Franchise Agreement In Order To Protect The System.

There is little doubt that a strong franchise agreement, equitably administered, protects the franchise system. It further protects the franchisee from those franchisees that fail to follow franchise standards. Consider the harm to the network and the franchise brand from a poorly operated location. Successful franchise companies invest considerable time and money to enforce system standards and protect their brand, which is beneficial to all franchisees.

4. The Most Successful Franchisees Are Those Who Follow The Program.

Franchising is not fool proof. Obviously, there are certain franchise systems that are so highly sophisticated and organized that most franchisees can succeed if they do what they are required to. There are also a number of franchises that require independent decision-making and active participation by the franchisee. In any case, franchising is not designed for the creative entrepreneur or free spirit. The most successful franchisees follow the franchise program and heed the advice of the franchisor.

5. Profitability Should Precede Franchisee Expansion.

Many franchisees have an unquenchable thirst for territory, looking to open up another store, location or office before they have reached profitability with their first location. In a number of cases, the franchisee doesn’t have a viable and profitable operation preceding this expansion. Since it’s going to require capital to develop the additional territory the new or emerging franchisee can have problems trying to develop more territory.

Franchisees that maximize their existing territory are the ones who will typically end up being the most profitable and create the greatest amount of wealth for themselves and their operation. When they do expand, they are in a much better position to do so.

6. Franchisees Should be Represented by Accomplished Franchisees

I have established a number of franchise advisory councils. In those instances, the franchisees elected franchisees who they felt would represent the interests of all franchisees. However, I recall a situation, where several franchisees campaigned to be on the committee; many of the more accomplished franchisees were not interested. The franchisees elected six (6) franchise advisory members of which four (4) were the most outspoken and rebellious franchisees out of about one hundred and twenty franchisees in the network. The result was that when we had our first meeting, these franchisees attempted to promote their own personal agenda, rather than focusing on the concerns of their constituents. When filling committee and council slots it is important for franchisees to elect their peers who are successful, articulate and reasonable.

There are certain practices which have been common to the franchise industry for a number of years. These practices, that I refer to as the Laws of Franchising are as true today as they were 30 years ago. Understanding and adhering to these Laws will lead to a higher probability of running a successful franchise.