Franchisors and Franchisees Should Manage Change

Change is an important component of all business relationships and this is particularly true in franchising. When significant change is considered or takes place it’s important that the franchisor and franchisees are capable of conducting their business without disrupting their relationship. In addition, change should consider the needs and objectives of both parties.

From time to time franchise organizations need to make changes in order to maintain the vitality of the business. When a major change takes place, franchisors and franchisees must be equipped to deal with change.

It’s a given that franchise organizations will implement changes to their franchise program from time to time. Some changes are procedural in nature and can be implemented as per an existing policy. Typically, the process involves a written revision to the franchise operations manual followed by notice to the network. On the other hand, there are certain decisions such as the sale of a company, an acquisition or merger that requires confidentiality. When a franchisor decides to make other changes, these should be communicated to the franchisees before the change is implemented.

The reasons for prior notice can include:

• Using the franchise advisory council as a sounding board and gaining a buy in.
• Providing franchisees the benefit of knowing about the change.
• Giving the franchisee community the opportunity to respond.
• Enlisting select franchisees to help mold the change in order to avoid a confrontation.

Major changes that have a direct impact on franchisees demand special attention. In certain cases, the change may not be that significant, but rather the perception by franchisees is that the change is the beginning of “more to come.”

Examples of Significant Changes Include:

1. Changes to franchise agreements that revamp length of term, renewal terms, royalty fees and default conditions. These changes can cause particular concern among franchisees that will be renewing their agreements.
2. Changes in marketing or advertising programs that represent a significant departure from the current program.
3. Changes in the direction of the business or company strategy that involve applying resources to a new venture or business

For their part, franchisees should be willing to accept certain changes as the need for the franchise organization to adapt and evolve may be a business necessity.

In order to maintain a positive franchise relationship prior to implementing change the franchisor should evaluate and measure how the change will affect franchisees. The feedback can come from franchisor field staff, or from the franchisees themselves.

Franchisors should demonstrate flexibility in introducing change. When feedback indicates a great deal of resistance to change, the franchisor should consider the situation, and avoid unnecessary confrontations. For their part, franchisees should avoid resisting change until all the facts are known.