Power Of One

Another equally logical question franchisors face regards the control they consider so precious. Aren't franchisors a bit concerned about whether the precarious balance of power might topple? "There's a fine balance to be struck," says Kaufmann. "As far as a concentration of power that will enable a single franchisee, or a group of very powerful franchisees, to lord it over their franchisor, that has been known to happen. The number at which the balance of power shifts too much and poses a danger to the franchisor varies from system to system and, more important, from industry to industry."

Kaufmann points out that while lines are inevitably being crossed, the franchisor must still maintain ultimate control over the relationship. "I have seen franchisors, in their haste to grow, grant entire large markets to franchisees, only to find out 10 years later that that market was vastly underexploited because the franchisee breached development obligations," he says.

Yet franchisors aren't the only ones taking risks in this relationship. "The franchisee has to be very careful that the franchisor doesn't promote growth just for the franchisor's benefit," says Del Prete. "There's a lot of pressure from franchisors to force single-unit operators, or even multiunit operators, to expand further or faster than they're capable of. And when the franchisor is doing it for its own advantage, to generate more sales and open more locations, that produces failure. Every franchisee should [think] carefully about growing, and not get caught up in [the furor]."

For better or for worse, the furor won't likely die down any time soon. And the fate of single-unit franchisees, those who just want to pay the rent and put food on the table? They aren't necessarily headed the way of the dinosaur, though Kaufmann points out that these opportunities may eventually be restricted to certain systems, industry segments or geographic locations.

Some might argue that it's a small sacrifice for the good of franchising as a whole. "I see this as extraordinarily healthy," says Kaufmann. "Franchising is moving to a much more sophisticated plane."

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This article was originally published in the December 1996 print edition of Entrepreneur with the headline: Power Of One.