Reading time: 6 minutes

Managing a successful franchise is a complex and challenging venture. Issues range from franchisor-franchisee disputes, compliance obligations to recruitment and training. This article will highlight a few of the common issues that arise in managing a franchise and provide practical suggestions to combat them.

Managing a Franchise Network

An essential aspect of any successful franchise is maintaining the high-quality delivery of services and maintaining consistency across all locations. This is a challenging task as franchisees often join at various stages of the business. It is therefore important to ensure clear communication of standards. You should also aim to maintain transparency of decisions that may affect franchisees to help them understand and accept decisions made by management.

Franchisees should receive fair and equal treatment. It may be tempting to provide incentives such as discounts to franchisees with valuable business or industry experience to get them on board. However, you should avoid doing this to prevent other franchisees in the network from becoming bitter.

Franchisee Recruitment

One of the most critical aspects of creating a successful franchise is recruitment. The number of franchisees in a franchise system is often a key measure of success. As a result, it is often tempting to grow the network quickly to increase revenue and brand recognition.

Adopt a balanced approach when it comes to recruitment, with a focus on quality over quantity. Recruiting poor quality franchisees can become troublesome, especially if they all fail at once or if it leads to litigation. This situation can be both stressful and financially draining on the entire franchise network.

Hiring an external consultant who has expertise in franchise recruitment can assist in the recruitment and training process. Often these consultants are paid on a commission basis, for example, 25% of the initial franchise fee. Although this can be costly, a lasting relationship with a franchisee and building a quality franchise network can pay dividends in the long run.

Franchisee Training

Training franchisees is crucial to assisting in their success and creating a lasting relationship. The initial training period is particularly important. Training is a critical period when franchisees learn everything necessary to run the business. Early losses in confidence can ruin the franchisor-franchisee relationship. It can be a very intimidating and overwhelming experience for independent franchisees if they are not provided with adequate support.

The operations manual is the main document that explains to the franchisee how to run the business. This document should provide the franchisee with all the necessary information to run the business and adhere to the requirements in the franchise agreement. This should be paired with a highly structured initial training period to give the franchisee the knowledge they need to be successful.

Putting yourself in the shoes of the franchisee can assist in structuring the content of training or training material. Including pictures, diagrams and videos can significantly assist franchisees in understanding the systems and processes. These materials should be refined and improved through franchisees’ feedback. Engaging an external consultant with expertise can also be a great way to get a fresh perspective and feedback on training materials and processes.

Developing a mentoring program where more established franchisees assist new ones can also be a great way to assist franchisees. It allows franchisees to build a network and feel supported by the franchise network.

Franchisor and Franchisee Compliance

Regulations have set out strict requirements for franchisors. Franchise obligations have become increasingly strict in recent times as a result of a number of high profile court cases. The Australian Competition and Consumer Commission (ACCC) has sought to enforce these compliance obligations against franchisors.

An example of these heightened compliance requirements is the introduction of legislation such as the Protecting Vulnerable Workers Act. This legislation looks to hold franchisors responsible for franchisees underpaying employees. It enforces a particularly high standard as it keeps franchisors accountable for the actions of franchisees.

Increasingly, regulations are placing more and more emphasis on the responsibility that franchisors have for their franchisees. You can take proactive steps to reduce your risk of infringement by educating franchisees on their legal obligations. For example, you could incorporate an employment law module into their training.

Franchisor-Franchisee Disputes

In any franchise system that is around for a number of years, franchisee-franchisor disputes are likely to occur. It is crucial that you prepare yourself for these situations. Do not simply assume you or the franchisees will not breach the franchise agreement. You can take steps to prevent disputes from arising by:

  • ensuring quality recruitment;
  • providing comprehensive training; and
  • providing ongoing support to your network.

Proactively prevent conflict by having clear avenues of communication and providing support. Doing so will allow you to understand the issues affecting franchisees so that you can take steps to prevent disagreements from escalating.

You should develop an action plan to deal with issues that arise at the franchisee level. This plan will likely include taking steps to understand the causes of the franchisee’s problems and develop a plan which works towards the resolution of this issue.

For example, if the franchisee cannot find appropriate staff, the plan could involve having them attend a course on recruitment or having them work with a recruiter.

These action plans may also involve decreasing fees or providing financial support in order to get them back on track. You should make sure that the arrangement is in writing, temporary and strictly confidential. This will show the franchisee that you care and that you are willing to work with them to achieve mutual success. Also, consider creating a formal procedure and policy to deal with employees and general complaints at the franchisee and franchisor level.

Key Takeaways

Running a successful franchise requires careful structuring and preparation. There are changing regulations that need to be carefully adhered to and obligations that need to be fulfilled. Ongoing support and training, as well as formal policies and procedures, can assist in avoiding disputes with franchisees. If a dispute arises, it is vital that you attend to the situation appropriately and provide the franchisee with the proper tools to remedy the situation. If you have any questions about expanding your franchise or about franchise regulations or structures, get in touch with LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Matthew DeRusha
Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards