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There is Room For Only One Entrepreneur

Posted by Elizabeth Gore-Jones on 12 January 2015

Franchisors tend to be an entrepreneurial lot. 

Generally the very nature of franchising a business is entrepreneurial in itself.  However, creating the concept of the business, establishing the business and making the business work (more often than not from an innovative idea in the first place) is often where the true entrepreneurship starts.

A franchise is a very personal thing to its founder.  The franchisor is very proud and very protective of his or her creation.

Sometimes a franchisee wants to be a part of the bigger picture.  They can envisage bigger, brighter and shinier products and services which in their opinion could take the franchise system to the next level.  Alternatively, a franchisee may want input into the marketing, branding or promotion of the franchise system or the products and services provided by that system.

It has been our experience that this can be where problems start between franchisees and franchisors.

The franchisor may not be receptive to a franchisee's input.  The efforts of the franchisee may be in a different direction to that envisaged by the franchisor, may not be a corporate fit to the dynamic of the franchise system or the franchisor may simply not be receptive to input from others.

This can lead to frustration on the part of the franchisee and may also lead to disputes between parties.

A prospective franchisee needs to understand what his or her role will be that of a franchisee.  In most cases that will not be as an independent driver of the business or the franchise system.  If they are envisaging a "partnership" where both parties will drive the system they may be disappointed.  

A prospective franchisee needs to ask him or herself if they can be a follower.  More often than not the franchisee will be required to follow the system and the directions of the franchisor.  If it is  not in the prospective franchisee's nature to fulfill that role then maybe franchising is not a real option for that person.

If the franchisee does have visions of contributing above that of the usual franchisee/franchisor relationship, then the franchisee should broach this with the franchisor before entering into the franchise agreement.  This should be a part of the franchisee's due diligence process.  If the franchisor is receptive to such input, then it would be ideal if the structure around that input is documented to give the franchisee something to rely upon to evidence the agreement if need be.  If the franchisor is not agreeable to documenting the arrangement then the franchisee will need to determine whether to proceed with the agreement knowing that his or her input may not be considered in the future.

It is important that both franchisee and franchisor are open and honest with each other and with themselves about what they hope to achieve from the relationship.

Author: Elizabeth Gore-Jones
About: Elizabeth specialises in franchising law. She lectures at Bond University PLA in franchising, she sits on the Queensland Law Society Franchising Committee, she is a past member of the Women in Franchising committee and a past member of the Franchise Council of Australia.
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