How Much Support Should Franchisors Provide to Franchisees?

In Short

• Franchisors play a crucial role in supporting franchisees through comprehensive training programmes and operational guidance.
• Continuous support includes marketing assistance, regular updates on best practices, and problem-solving strategies.
• Effective communication and a well-structured support system can enhance franchise performance and strengthen the franchisor-franchisee relationship.

Tips for Businesses

Develop a robust support system for franchisees that encompasses initial training and ongoing operational guidance. Provide marketing resources and up-to-date best practices to help franchisees succeed. Foster open communication channels to address concerns promptly and maintain a strong, collaborative relationship with your franchisees.

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Table of Contents

• Franchise Agreement 
• System and Marketing Plan 
• Training
• Good Faith 
• Employment Law 
• Key Takeaways 
• Frequently Asked Questions

While the Franchising Code of Conduct does not explicitly dictate the level of support a franchisor must provide to its franchisees, it is clear that a franchisor’s success is intrinsically linked to the success of their franchisees. Therefore, franchisors must offer robust support to their network. This article highlights important ways franchisors can provide support to help ensure their franchises thrive and succeed.

Negotiating Franchise Agreements Factsheet

When bringing on board new franchisees, it is important to negotiate agreements that strike a balance. This factsheet explains how.

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Franchise Agreement 

The Franchise Agreement between the franchisor and the franchisee will often set out the agreed level of support within the relationship. For example: 

• initial training; 
• availability to respond to queries from franchisees within the specified period; and 
• when the Franchisor is obligated to provide updated training after a franchisee establishes its business. 

As a franchisor, when setting up your franchise, you must speak to your lawyer about how much support you would like to provide. Usually, it would be advantageous to draft the support clauses within your franchise agreement broadly. This will allow you to retain discretion and adjust the level of support you will provide to your network depending on its evolving needs and circumstances. For example, if your network expands rapidly, you may find that you do not have the resources to provide the broad support you promised initially. 

System and Marketing Plan 

A cornerstone of successful franchising is providing a robust system and marketing plan. These elements are often the primary reasons prospective franchisees are drawn to a franchise network, setting it apart from independent businesses.

As a franchisor, you should offer a comprehensive operational framework that includes the right to use your intellectual property and strategic marketing support. This typically encompasses:

• brand guidelines;
• marketing materials;
• national advertising campaigns; and 
• local marketing assistance. 

Additionally, providing guidance on digital marketing, including social media management and website development. These systems, intellectual property, and marketing plans generally attract prospective franchisees and differentiate your network from competitors.

Consider allowing franchisee-led marketing initiatives within predetermined parameters to balance franchisee flexibility with brand consistency. The extent of your support and the scope for franchisee autonomy should be clearly defined in the franchise agreement, striking an optimal balance between centralised control and local adaptability. Although you are not required to provide all this support, generally, the higher your level of support, the higher the fees your franchisees can expect to be charged. 

Training

Now that you have your systems and marketing plans, franchisees will require training to help implement these and run their franchise business. Comprehensive training programs can be vital for the success of both individual franchisees and the overall franchise network. As a franchisor, you should seek to develop and implement a robust training system that equips your franchisees with the knowledge and skills necessary to operate their businesses effectively. These training programs will typically include: 

1. Initial training: An intensive program covering all aspects of the business, from operations and financial management to customer service and brand standards; 
2. Ongoing training: Regular updates and refresher courses to keep franchisees informed about new products, services, or operational changes; and
3. On-site support: During the initial setup and launch phase, ensure proper implementation of systems and procedures.

While there is no specific mandate regarding the amount or depth of training a franchisor must provide, it is important to remember that investing in a robust training program ensures consistency across your network and demonstrates your commitment to franchisee success. Well-trained franchisees are more likely to operate profitable businesses, maintain brand standards, and contribute positively to the overall reputation of your franchise system.

Your franchise agreement should outline the training obligations of both the franchisor and franchisee, regardless of the level of training. This may include mandatory attendance at initial and ongoing training sessions and any associated costs. 

Good Faith 

The Code requires both the franchisee and franchisor to act in good faith. As such, in determining how much support you will provide to a franchisee, you should act in good faith. In general, this means acting honestly and cooperating with your franchisees to achieve the purpose of the franchise agreement. 

As you are likely aware, the obligation of good faith extends to all aspects of your relationship and applies before, during and after you enter into the franchise agreement. Whilst there is no prescribed formula for acting in good faith, you will likely be considered to be acting in good faith if you:

• consider issues and requests you receive from franchisees as they arise;
• make decisions relating to your franchisees within a reasonable period (i.e. not causing delays);
• making into account the franchisees’ legitimate business interests in developing support systems throughout the franchise network; or 
• providing a ‘reasonable’ level of support. 

Employment Law 

With the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Fair Work Act), franchisors may be held responsible if their franchisee does not comply with workplace laws. This liability may extend to the franchisor even where they were not directly involved in the workplace breach. As such, it would be in the franchisor’s best interest to ensure its franchisees comply with workplace and employment laws. One way to do this is by supporting franchises in this respect by providing training and implementing processes to monitor franchisees’ compliance with such laws. Some strategies to do so may include:

• providing employment law training to your franchisees (for example, at your annual conference);
• distributing updates on relevant changes to employment laws; 
• providing copies of the Fair Work Handbook;
• having a dedicated point of contact within the franchisor company for employment-related questions; and 
• recommending that franchisee use the software for calculating award rates and entitlements under the Fair Work Act. 

Key Takeaways 

Supporting your franchisees is an important part of operating a successful franchise network. When determining the level of support to provide, you should consider the above principles. Once you explicitly state the level of support you will provide in your franchise agreement, you must uphold your obligations under it. Failure to uphold such obligations would result in a breach of the contract.

If you need help drafting your support provisions, our experienced franchising lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions