In The News

Tue 9 Aug 2016

Franchising Networks: The impact of one and the importance of the Franchisor


Business Planning & Strategies

When dealing with a franchise network, people will not often distinguish between different franchised businesses, but instead think of one overall business.

Franchising as a business format encourages the above view. Most franchise systems seek to ensure that every existing or potential customer can generally expect to experience the same consistent products and/or services irrelevant of which franchisee they go to. While they may be some deviations relevant to the area the franchisee is located to take into account different customer needs, overall the experience should be same.

Given the above, where one or more franchisees go against the model this can not only cause problems for that franchisee, but may negatively impact the brand and/or network as a whole. Any negative publicity may focus on the brand rather than the specific franchisee and/or the public only hears the brand name and the whole network becomes coloured by the actions of one or a few.

Consequently, it is important that franchisees follow the franchise system model and franchisors regularly review what their franchisees are doing to ensure franchisees are adhering to the model, and if not, then take action to re-align parties to ensure consistency.

To assist the above Franchisors should ensure:

1. They have clear written systems, processes and documents in place to ensure franchisees are aware of and can understand what is expected of them and how they can meet these expectations from the beginning of and then throughout the relationship;

2. They regularly monitor what their franchisees are doing and have processes to ensure that any failure to meet expectations are dealt with as soon as practicable to assist parties re-align, or where appropriate, exit the system.

Franchisors should with their legal advisors also be regularly reviewing their systems, processes and documents to ensure that they not only remain appropriate and provide the required protection, but are also legally enforceable.

Please note this does not purport to be comprehensive advice relevant to your circumstances. Consequently, specific legal advice for each of your circumstances should be obtained first before taking or not taking any action in respect to this area.


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