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Insights and Strategies in Navigating the Franchisee-Franchisor Relationship It's more personal than it seems.

By Mark Siebert

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Opinions expressed by Entrepreneur contributors are their own.

The following excerpt is from franchise expert Mark Siebert's book Franchise Your Business. Buy it now.

As a new franchisor, you may find the nature of your relationship with your franchisees to be unique and even, on occasion, daunting. While you have the right and the obligation to enforce system standards, your franchisees often view themselves as an independent business (which they are) with the ability to call their own shots (which they are not). And while the relationship is contractual in nature, if you are ever forced to bring out the contract, the relationship is already in jeopardy.

Thus, the franchisor must pay particular attention to the franchisor-franchisee relationship from the very start if they want to create a long-term and mutually prosperous undertaking.

Related: These Are the Top 200 Global Franchise Brands in 2023

Franchises are not like marriages, but joint ventures are

We have often heard people compare the franchisor-franchisee relationship to that of a marriage. They will talk about the "honeymoon" period and how the franchisor and franchisee are in "partnership" together for a common purpose. While this analogy may have some merit, our feeling is that a marriage is exactly what the franchise relationship should not be.

When we think of marriage, we think of a joint venture relationship. In a joint venture, there are partners. Because of the relatively equal footing of the "partners," the typical joint venture starts out with a negotiation--and is often a series of ongoing negotiations. Like a marriage, there are the "who does the dishes" issues, and then there are the more serious issues, such as money. Because each joint venture is unique, every one of these issues is usually subject to negotiation.

Because a joint venture partner typically is compensated based on how much money goes to the bottom line, one concern that most "spouses" have is how the accounting gets completed. On a one-off basis, this is fairly easy to monitor. But on a massive scale, it is almost impossible. And when your joint venture spouse does cheat on you, it can become a battle among equals in divorce court. In fact, that is one of the big differences we find between franchising and joint ventures.

Related: Tips and Strategies for Using the Balance Sheet as Your Franchise Scorecard

Franchises are like a parent-child relationship

The franchisee, like a child, will go through a variety of growth phases during the course of their life.

  • They are typically very dependent on their parents in the beginning, relying on them for the education and training that will allow them to survive in this world.
  • As they grow older, they become less dependent, and you begin to allow them some latitude--first playing in the yard and eventually crossing the street on their own.
  • As they get older still, they will begin to test the boundaries of their relationship and perhaps break some of the rules.

But they still live in your house, and what you say, goes. It is simply a question of how forcefully you choose to put your foot down.

Related: How to Determine Your Franchise's KPIs and Achieve Profitability

How to be a good parent

A franchisor needs to start by establishing the boundaries of the relationship. It is important that the franchisee understands that your first role as "guardian" is to guard the system and the brand so all franchisees can continue to thrive. Thus, one of your most important roles as a franchisor is that of disciplinarian. To do that, you need to clearly communicate the rules and your intention to enforce them from the start.

At the same time, it is important to understand that, as a franchisor, discipline can no longer be meted out the way you may have when you owned all your operations yourself. If you try to give a franchisee the "it's my way or the highway" speech that worked so well before, you'll quickly find yourself with alienated franchisees.

Franchisees are business owners. And as such, they require you to communicate with them in a professional manner. Being firm with franchisees, as opposed to managers, also means providing them with an explanation for your various "requests." Most franchisees have a key desire for their opinions to be heard. A franchisor should thus avoid making decisions in a vacuum and providing direction to franchisees without a clear explanation of why the direction is being given.

Related: 'More Crucial Now Than Ever Before,' The Biggest Franchise Trends of 2023, According to 17 Top Franchise Executives

Communication is key

In today's technology-centered society, it is all too tempting to rely on the internet for all our communications. But in a franchise context, that would be a big mistake. All too often, we have seen well-intentioned e-mails ignite a firestorm when they are misinterpreted.

Relationships are built with dialogue, so it's important that you encourage dialogue in every aspect of the relationship. Good franchisors are careful to create multiple venues where constructive dialogue will occur. Annual conventions, regional meetings and advertising councils provide this two-way communication.

To be effective, communication needs to be more than frequent. It needs to be honest. While there are some things you may choose not to share with your franchisees, the key to a long-term sustained relationship is trust. And trust starts with openness and honesty. Get caught in a lie once, and you have destroyed that trust forever.

Your staff and advisory council should be approachable

The accessibility of your senior staff is vital. I have known the senior executives of some fast-growing franchisors who will not go home for the night until they have personally returned every franchisee's call.

One of the most important tools at a franchisor's disposal is the franchise advisory council. As the franchisor, creating this council not only allows you to control the agenda, but also assures you have a voice on it. The last thing you want to do is find out your franchisees have formed an organization without you—that's usually a sign something is wrong, and they have excluded you from the process of resolving the grievance. Whatever comes next is usually not pretty.

Related: These Are the Top 200 Global Franchise Brands in 2023

If they do well, you do well

Lastly, to be effective, you have to genuinely care about the success of your franchisees. Good franchisee relationships start with a franchisor that is, first and foremost, committed to franchisee success. That commitment, more than anything else, needs to permeate the franchisor organization at every level.

If your franchisees do not sense your commitment, the relationship can quickly become adversarial. If, on the other hand, your franchisees see you breaking your back to help them achieve their success, there is almost nothing they won't do for you.

Franchise Your Business

Ready to grow your business? Franchising may be for you.

Expert franchise consultant Mark Siebert delivers the ultimate how-to guide to employing the greatest growth strategy in franchising. Siebert tells you what to expect, how to move forward and avoid costly mistakes as he imparts decades of experience, insights and practical advice to help grow your business exponentially through franchising.

Learn how to:

  • Evaluate your existing businesses for franchisability.
  • Identify the advantages and disadvantages of franchising.
  • Develop a business plan for growth on steroids.
  • Evaluate legal risk, obtain necessary documents and protect intellectual property.
  • Create marketing plans, build lead generation and branding for a new franchise.
  • Cultivate the franchisee-franchisor relationship.

Evaluate if this is the right move for you and discover how to get started with the help of Franchise Your Business.

Mark Siebert

Entrepreneur Leadership Network® VIP

Franchise Consultant for Start-Up and Established Franchisors

Mark Siebert is the author of The Franchisee Handbook (Entrepreneur Press, 2019) and the CEO of the iFranchise Group, a franchise consulting organization since 1998. He is an expert in evaluating company franchisability, structuring franchise offerings, and developing franchise programs domestically and internationally. Siebert has personally assisted more than 30 Fortune 2000 companies and more that 500 startup franchisors. His book Franchise Your Business: The Guide to Employing the Greatest Growth Strategy Ever (Entrepreneur Press, 2016) is also available at all book retailers.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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