How much control do you have in a franchise system?
I will discuss some common misconceptions I hear when I speak to business owners contemplating franchising a business.
I will lose control of my business.
Operating manuals are one of the most critical documents in your franchise system. The manuals are your entire operating system documented. This is the detailed instruction for Franchise Partners on how they will operate all areas of the business, so it's really important that your operating manuals are comprehensive.
It is a common misconception that the Franchise Agreement is the most important document in a franchise, and yes, it ties the whole relationship together, but the Franchise Agreement references the operating manuals as an extension of it, so everything that we put in your operating manuals your Franchise Partners are contractually obligated to follow.
The manuals are very detailed documents. They don't just provide high-level guidance to Franchise Partners. They go into detail and explain why things are done a certain way, and they'll also provide a very defined process around completing some of the key tasks. The operating manuals are a key tool in managing compliance and protecting your brand.
Remember also that Franchise Partners are investing in a franchise because they want a set of proven operating systems and processes to follow, otherwise, they would go out, start their own business, and work it all out on their own.
The entire franchise network conforms to one set of manuals which ensures that each location is operated consistently and uniformly. It will be important that you follow up on and manage compliance from day one. I don't mean in an overbearing or strong handed way but encouraging Franchise Partners to stay within the defined process.
When there are deviations from the system, legal options are built into your Franchise Agreement to enable you to act and stop that happening and get them back on track.
My brand will be damaged.
This is one that I often hear and refer back to the operating manuals but more than that. Franchise Partners have skin in the game; they won’t want to deliberately operate in a way that could potentially cost them their business or cost them customers.
Generally, Franchise Partners try hard to do everything right because they want to be successful in the business. We see a very different mentality to employees who are doing a 9-5 job. Obviously, there are some exceptions with employees, but generally, you get a very different attitude to the business from a Franchise Partner than you do an employee.
Minimum customer service standards are included in the manuals providing very clear expectations and guidelines to follow. A comprehensive training and onboarding programme will ensure Franchise Partners are set up for success.
The Franchise Partner will learn about my business and then go and set up in competition.
Let's look at this realistically. There are far easier ways to steal a company’s IP and learn its systems than to go through the entire recruitment and due diligence process to learn of all of the operating systems and then walk away from your franchise and go and set up in competition. Remember, these Franchise Partners have had to go through your qualifying process and incurred costs consulting with an account and lawyer. I can’t even think of an example where a Franchise Partner has gone through the process, spent tens of thousands of dollars buying into the business to learn everything and then go and set up in competition.
At some stage, the Franchise Partner will either want to sell or exit the business. The Franchise Agreement has a robust restraint of trade clause, so that will give you a good legal position to be able to stop that from happening.
A franchise relationship gives you more ability to protect your IP from theft by Franchise Partners than you have with employees. Employment courts will not stop an employee from earning a living, so it can be quite challenging to prove that they've stolen Intellectual Property or, you are approaching your customer base.
Selling inferior products under your brand
The Franchise Agreement clearly states rules around suppliers and supply agreements, along with the quality of approved products and services. Most franchisors choose to stipulate which suppliers their Franchise Partners purchase from. Remember that group buying power is one of the significant advantages for the Franchise Partner so they will want to honour those supply deals.