The average franchise relationship is 7‒20 years plus, meaning that these are long-term partnerships driving growth from both sides. When the economy is thriving, an equitable relationship between franchisees and franchisors comes easily … or easier. However, it’s how each party handles themselves during difficult times that really defines the relationship. When a franchisee‒franchisor relationship sputters, it may lead to costly disputes, operational inefficiencies, and ultimately, a bitter taste in everyone’s mouth.
Considering that these are unprecedented times for both the restaurant industry and the global supply chain, we wanted to share tips that, when implemented, will strengthen this important partnership.
Practice Radically Transparent Communication
The first tip is cliché for a reason — because it works. The key to success is to communicate transparently in a measured, respectful way. This could come in the form of more regular meetings, more email updates, regular, candid conversations, open forums, online communities, or informal check-ins. Choose whatever way works best for your network, so that everyone keeps their finger on the pulse.
The flow of information isn’t a one-way street, however. Communication needs to go both ways. For instance, franchisees may have ideas from being on the frontlines of business. They may have noticed a new trend that hadn’t reached the franchisor’s orbit yet. Communication as a feedback loop works to benefit both parties. Franchisees must feel safe to voice concerns, share local market nuances, and offer constructive feedback without fear of reprisal. In the end, a two-way dialogue will allow for more agile adaptation in the fast-paced world of foodservice.
Empower Local Innovation Within Brand Guardrails
A common point of contention between franchisors and franchisees lies in the interpretation and enforcement of brand standards. Franchisors, understandably protective of their carefully cultivated image, often mandate strict operational procedures, menu specifications, and marketing campaigns.
However, franchisees, operating in diverse local markets with varying consumer preferences and economic realities, can feel stifled by these rigid guidelines. For example, what works well in a bustling urban center might not resonate in a suburban strip mall.
Disputes can arise over everything from ingredient sourcing to promotional offers, leading to accusations of inflexibility and a lack of understanding of local nuances. The franchisor sees consistency; the franchisee sees handcuffs.
While consistency is paramount in franchising, a rigid, one-size-fits-all approach can stifle growth. Savvy franchisors recognize that their franchisees are often closest to the pulse of their local communities. Allowing for carefully considered local marketing initiatives, menu tweaks (within brand parameters, of course), or operational adjustments can boost local relevance and drive sales. This doesn’t mean a free-for-all, but rather a structured process for proposing, evaluating, and potentially implementing franchisee-led innovations that can then be shared across the network if successful.
Invest in Mutual Success
Ideally, franchising should feel like a guided entrepreneurial experience, rather than a landlord‒tenant dynamic. When franchisees feel their franchisor is truly invested in their success, their engagement and motivation soar. The same can be said when the franchisee assumes good intention on the part of the franchisor.
Franchisors strengthen their partnerships when they demonstrate a genuine commitment to the profitability of their franchisees that supports infrastructure and franchise growth, whether that’s system-wide technology upgrades that benefit all locations, negotiating better supplier contracts that lower costs for franchisees, or providing ongoing training and support that goes beyond the initial onboarding. Or consider establishing a collaborative marketing fund where both parties contribute and have a say in allocation.
Data-Driven Decision-Making
The pace and direction of innovation can be a significant source of tension when data isn’t presented. Consider the following example:
A franchisor is striving to stay ahead of industry trends, leading them to mandate costly upgrades to equipment, menu items, or technology platforms. A franchisee, with established operations and tight margins, can balk at these unexpected expenses, especially if they don’t perceive an immediate or significant return. The franchisor sees necessary evolution; the franchisee sees an unfunded mandate that eats into their profits.
To improve this tension and avoid resentment, the franchisor should have first made franchisees aware of this upgrade possibility before its mandate so that there are no surprises. Then, because disputes often arise from subjective opinions, the franchisor should explain their decision using data.
Establishing clear performance metrics, transparent data collection, and collaborative analysis helps to depoliticize decision-making. For instance, franchisors should provide franchisees with accessible dashboards and tools to track key performance indicators (KPIs) and benchmark their performance against the network. Jointly analyzing this data can lead to identifying best practices, addressing underperforming areas, and making informed strategic adjustments.
Rather than a franchisor surprising a franchisee with an expensive mandated upgrade seemingly out of nowhere, open communication throughout the process is a must. Most franchisees don’t appreciate franchisors with “because I said so” attitudes and will thrive only in a shared culture of continuous improvement based on objective evidence.
Stronger Together
Challenges between franchisees and franchisors are inevitable. However, they represent opportunities to forge stronger, more resilient bonds. Radical transparency, localized ingenuity within a cohesive brand framework, a commitment to shared success, and using data to chart a course for collective advancement are key to building a system where franchisor and franchisee fuel each other’s ambitions, drive innovation, and achieve sustained mutual success.
