Although there may be differences in the way franchisors operate their franchise system we can assume with confidence, that franchisors intend to develop a franchise network with profitable franchisees and strong brand recognition. If there is an operational difference among franchise systems, an indicator can be found in the balance found within a franchise system. I would describe this in terms of how a franchisor interacts with their franchisees. This is not to say that all franchisors aren’t concerned about their franchisees but rather what is the operating philosophy that certain franchisors utilize. In order to more clearly define this phenomenon, I believe that franchisors usually fall into one of the following two categories or somewhere in the middle; Franchisee Centric or Franchisor Centric. Problems can arise when there is a pattern of overly emphasizing one approach over another.
The following table provides some examples of the differences among the two approaches:
|Franchisee Centric||Franchisor Centric|
|Introduces new products or programs using franchisee input||Excludes franchisee input and attempts to sell this to franchisees|
|Has a process to obtain franchisee feedback to avoid major issues from arising||Tends to take a more passive approach. No news is good news.|
|Has a procedure for dispute resolution||There is no formal procedure in place|
|Regularly monitors and measures franchisee financial performance||Obtains franchisee financials but fails to fully analyze results|
|Reluctant to strictly enforce systems standards||Aggressively enforces franchise system standards|
Franchisors that employ a balanced approach when working with their franchisees rather than emphasizing one approach over the other can be the most effective path to follow.There are other examples that one could add to the above, however, the important point is that many franchisors tend to emphasize one approach over the other. The problem with a Franchisor Centric approach is that the most important franchisor constituencies are their franchisees and the end users. By excluding the emphasis and involvement of its franchisees from important operational activities, a franchisor risks weakening their franchise system. On the other hand, there may be instances when the franchisor needs to be assertive when addressing a particular issue that can impact the franchise network in a negative way. In this case a conciliatory approach from the franchisor may not be the best way to address this problem.
60% of franchisors provide a financial performance representation (“FPR”) under Item 19 in their Franchise Disclosure Document.
As part of a franchise candidate’s due diligence process, it should be expected that certain questions will be directed to franchisor staff.
It was quickly apparent that some employees struggled working from home. They had never experienced the challenges associated with time management.
Detailed studies on emerging franchise success rates, errors in Item 20 disclosure and sector performance, Franchise Grade’s reports help you.
There have been various changes in average franchise investments during this time, some changes were more dramatic than others.