As a lawyer representing both franchisors and franchisees I have somewhat of an unique perspective on franchisor / franchisee relationships. Most franchise lawyers tend to represent one side or the other. But it is somewhat rare for a franchise lawyer to represent both sides. I have spent over two decades now reviewing franchise agreements. I started out representing primarily franchisees, but as my law practice evolved, I turned to representing franchisors in developing their franchise systems. I have always believed that franchisors need to care more about their franchisees. Franchisors often need to do more than just get their franchisees in business. All too often I have seen franchisors fail to support and guide franchisees. Instead, many franchisors look to the franchisee as a revenue source and not much more.
A couple of instances lately have done nothing to change my mind and prompted me to write this blog post. First, I reviewed a franchise agreement that was not just one-sided, but could only be described as incredibly restrictive against the franchisee. If there was ever a protection created for a franchisor over a franchisee, this franchise agreement seemed to have it. From a franchisor legal perspective, it was no doubt written by an experienced franchisor lawyer who had painstakingly taken the time to protect the client in almost every respect. But from a practical perspective, the franchise agreement could spell doom for a potential franchisee and signaled to me a hardened approach that did not bode well for a franchisee.
The next instance involved my discussion with a new franchisor. He told me his story of how he actually started in business as a franchisee. He explained to me how his former franchisor “sold him a bill of goods” and had failed to support him in any way after starting his business. And to make matters worse the franchisor made no concessions to allow him to stay in business when the economy turned poor in 2008. So his vow is to create his own franchise system that will use “almost the exact opposite approach” of his former franchisor.
Does it have to be this way? Do franchisors need these overwhelmingly restrictive franchise agreements? Do franchisors have some obligation to support their franchisees and help them through the bad times? A couple of my new franchisor clients say their sole focus is developing franchise brands that are franchisee-centered businesses. As one new franchisor describes, “my financial success will come if my franchisees are successful.” And while that seems like a simply thought most franchisors should have, I can tell you in experience that is not a common mindset. Many franchisors from what I can tell do not really care all that much about franchisees. What they care most about is receiving a fee. They care about protecting themselves against defaulting franchisees. And they care about their own interests often to the detriment of franchisees.
What I am NOT suggesting is that franchisors should put franchisees first. Of course franchisors need to protect their businesses and systems. Of course franchisors should be concerned about their own profitability. What I am suggesting is that franchisors take a franchisee-centered approach. What does a franchisee-centered approach entail? To me, it means having empathy for franchisees. It means practicing attentiveness to franchisees’ questions and issues. It means communicating regularly with franchisees (which remarkably does not occur with many franchisors). It means developing effortless experiences with franchisees in terms of ease of doing business, training, and helping franchisees innovate their businesses. And finally, it means adding value for franchisees so you have created franchisees for life.
For many franchisors this may require a shift in mindset. A mindset that is not so rigid like your typical franchise agreement along with system rules, but instead that is more of a growth mindset where there is an emphasis on learning what works and does not work. And may require franchisors to listen much more to franchisees in order to improve in the future. Those are the types of franchisors I want to work with and I think it is the type of franchisor most franchisees want to associate with as well. And in the end, it is my strong belief that Franchisors who can take this franchisee-centered approach will set themselves apart to dominate the competition.