Franchising is a great way to expand your business. Unfortunately, franchises like Donut King, 7-Eleven, and Hungry Jacks have come under fire for exploiting workers and providing limited support to franchisees. It can be stressful to open up a franchise and not know if you have it in you to be a good franchisor. This article will discuss what makes a good franchisor and what requirements to look out for when franchising your business.
Being Honest With Franchisees
You need to maintain a good relationship with your franchisees. An effective way to maintain a good relationship with your franchisees is to be honest with them. You should also be open and honest with your franchisees regarding the challenges of running your business. Likewise, you should let your franchisees know of any developments that could affect the business and them in turn. There are several possible business developments which warrant you informing your franchisees. These include your decision to open a new franchise location. Possibly your business may be going through a period of sales growth which may positively affect your franchisees. Alternatively, you may have found a way to increase your business’s profitability. Naturally, your franchisees would like to know of this information.
There will be a lot of fees that your franchisees will need to pay. It is best practice to inform your franchisees of the fees they will need to pay as soon as possible. For example, your franchisees will need to pay you an initial franchise fee and ongoing franchise fees. Ongoing franchise fees cover expenses relating to the use of your brand, intellectual property and the support you provide to your franchisees. Additionally, your employees will need to pay fit-out fees for the franchise location. As such, you should ensure that you are upfront about the fees involved with running a franchise of your business. This frank and honest disclosure will contribute to you maintaining a good relationship with your franchisees.
Good Leadership
As a franchisor, you are responsible for all the franchises. Despite franchisees having control over their franchise and running that business, you have control over the marketing and systems that those franchisees adopt. If anything goes wrong, it is a reflection of your brand.
You need to have a vision for your business. What is the growth you want to see? Where is the business heading? Franchisees want to invest in franchisors that can demonstrate a vision for their business and want to be part of the company’s growth. Good leadership will draw people to help in the expansion of your business.
Continue reading this article below the formSupporting Franchisees
Being a supportive franchisor is key to success with your business. It is vital to strike a balance between maintaining a good relationship with your franchisees and not being too involved and controlling over their daily operations. Therefore, it is important to maintain the high quality and intensity of the initial training phases. Your training should explain the objectives of the business. It should also allow room for questions and feedback.
After training, maintain regular contact with your franchisees. Some franchisees need more ongoing support than others. Monitor each franchisee’s performance. Prepare for discussions and reviews on growth and profit. See if there are common challenges and consider refresher training for those areas.
Detecting a need of your franchisee and providing them with resources and training to meet this need is a key component of being a good franchisor.
Compliant With The Law
As a franchisor, you need to follow regulations. The Franchising Code of Conduct imposes obligations on all franchise agreements that you must follow. The Code sets obligations before, during and after entering a franchise agreement. It regulates cooling-off periods and dispute resolution. It informs the necessary documentation you need to supply.
Australian Consumer Law governs consumer rights relating to warranties, advertising, promotion and anti-competitive practices. Familiarise yourself with the rights consumers have under the ACL to ensure your franchisees also know. For example, if a consumer receives a product that does not meet consumer guarantees, you must repair, replace or refund it. In addition, consumers can request compensation for any damage or loss suffered from a product or service.
Being versed in privacy laws such as the Australian Privacy Principles allows you to ensure you and your franchisees know how to deal with personal information such as client lists. Having documentation like franchise agreements, operation manuals, lease agreements, and dispute resolution clauses is necessary to comply with the law and follow best practices.
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Key Takeaways
The franchise model has been getting a bad wrap recently. However, it is a really great business model that can help you expand your business and allow franchisees to have control of a business without needing to start from scratch. As a franchisor, it is essential to uphold honesty, good leadership, support to franchisees, and compliance with the law.
If you need help setting up a franchise and understanding your legal requirements as a franchisor, contact our experienced franchise lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
There is no cookie-cutter model that if you follow it will make you a good franchisor. However, it is crucial that you have the following traits of honesty and you are a proficient leader. You must also support your franchisees when they require your advice and guidance. Arguably the most important consideration for being a good franchisor, is that you are compliant with all your obligations.
You as the franchisor, must follow the Franchising Code of Conduct. The code includes obligations you must meet requiring disclosure and acting in good faith. Additionally, you as the franchisor must also provide ongoing support and training, a marketing plan and operations manual to your franchisees.
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