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Four secrets to avoid franchise conflict
Written on the 12 January 2012 by Fiona Taylor
Franchise conflict research encompassing franchisor and franchisee perspectives reveals four secrets to minimising conflict in the franchise relationship.
The research, conducted by the Asia-Pacific Centre for Franchising Excellence was jointly funded through an Australian Research Council Linkage grant with the Australian Competition and Consumer Commission (ACCC) and Griffith University.
The four secrets to minimising franchise conflict are:
Lead researcher and Centre Director Professor Lorelle Frazer says the majority of franchisees in the research identified they initially held unrealistic expectations prior to entering franchising, contributing to higher levels of conflict.
“Franchisors need to work with franchisees to ensure they form realistic expectations prior to buying a franchise. This includes providing relevant and appropriate information in a timely manner,” Professor Frazer said.
“Confirmation of a franchisee’s expectations when entering a franchise has a significant positive effect on fostering trust in the franchise relationship.”
Trust in the franchise relationship is vital for successful franchise management and franchisee satisfaction.
Paramount to building trust is franchisor openness, Professor Frazer says.
“This involves effectively communicating with franchisees, sharing how the franchisor is growing the brand nationally, and trying to resolve any issues so everyone wins,” she says.
“At every stage franchisees need to know exactly what the franchisor is doing and why, otherwise they will become dissatisfied and refuse to follow the systems. Communication then breaks down and can really impact the franchise.
“Franchisors need to ensure communication is on-going and accessible to all parties.”
The research also shows trust and franchisor openness has a positive effect on relational satisfaction.
Although franchisee satisfaction is often largely determined by franchisee profitability, most interviewees agreed the quality and extent of franchisor openness and support determine overall franchisee satisfaction.
Franchises that use unilateral communications to focus on adherence to system standards and restrictive directives – such as caveats on local marketing and restrictive supplier agreements – have higher levels of franchisee dissatisfaction.
Further, the more satisfied franchisees are the less likely conflict will arise regarding issues such as use of the marketing levy, fixed supplier agreements and territorial encroachment.
Greater levels of franchisee satisfaction also helps reduce perceived conflict as the franchise relationship matures.
The majority of interviewees confirmed franchise conflict was an inevitable part of the franchising relationship, however the longer a franchisee stays with a franchise the more likely conflict will arise.
Professor Frazer says more experienced franchisees tend to discount the value of franchisor-provided services, such as training, financial assistance and promotional campaigns, instead crediting success to their own efforts.
“Franchisees that have been in the system for a long time are often the hardest to manage – they can begin to think they can do it better than the franchisor,” she says.
“They forget systems are in place for a reason and that royalty contributions are used to ensure the franchise has a visible brand in the market.”
More experienced franchisees appear to be less satisfied overall with the quality of the franchisor communication and conflict management strategies and are more likely to be in disagreement with their franchisors.
“Franchisors need to manage franchisee expectations throughout the franchise relationship, from before a franchisee signs a franchise agreement until they exit the franchise and even beyond,” Professor Frazer says.
“Fostering trust and franchisee satisfaction through franchisor openness and good two-way communication will help franchisors to minimise and avoid franchise conflict.”
The research was conducted by Centre members, Professor Lorelle Frazer, Associate Professor Scott Weaven, Professor Jeff Giddings and Professor Debra Grace.
To assist franchisees to form realistic expectations through their due diligence and help minimise conflict in the franchise sector the Centre offers a free, online pre-entry franchise education program, funded by the ACCC. Learn more…
Author: Fiona Taylor