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Franchising isn't easy – especially dealing with non-compliant franchisees

Written by Varsha Saraogi on Tuesday, 27 November 2018. Posted in People

Every franchisor wants a good relationship with their franchisees – after all, they represent the brand. But often there are some who choose to go rogue, which can result in termination or, worse still, court proceedings

Franchising isn't easy – especially dealing with non-compliant franchisees

successful and fully compliant franchise network is an asset to every franchisor. However, recruiting and retaining the right ones to build your brand can be a minefield and undoubtedly franchisee recruitment mistakes can turn any franchisor’s dream into a nightmare. Naturally, making mistakes is inevitable. “There isn’t a franchisee in this country at this moment that’s doing everything suggested in their operation manual – not one,” argues Rik Hellewell, founder of Ovenu, the oven cleaning franchise. 

But when franchisors do encounter a bad apple, they prefer to settle it amicably unless the franchisee repeatedly refuses to comply. “We will always try and give people the benefit of the doubt,” Hellewell reasons. “Franchisors are always seen as being the bad guys and the money grabbers but that’s not true. We want franchisees to understand we’re on their side. But for that to continue, they have to work with us, not against us.” 

Too worse for wear 

Reflecting on one of his undesirable encounters, Hellewell had to deal with a franchisee who went overboard hitting the bottle. “There are some absolute bloody idiot franchisees out there who give the rest of the network a bad name,” he says. For instance, Hellewell remembers a potential franchisee who not only paid the deposit but also attended the first day of his training, which fell on a Monday. However, he lost the chance of getting the contract due to his alcoholism. “He was drunk as a skunk on the same night as the induction and we didn’t see that guy again until Thursday – in fact on Thursday he was still drunk,” Hellewell recalls. “So we dispatched him back to Scotland and asked him to revisit the idea of becoming an Ovenu franchisee once he’d visited a clinic. The guy paid us £9,000 and didn’t get past his induction training and that surprised me.” Hellewell believes it’s beyond a franchisor’s control when they’re lied to as they recruit based on what they’re told. “If he told us he was an alcoholic, he wouldn’t have been awarded the territory,” he adds. “The moral of that particular story is we can only act on the information we’re given. Not if you’ve got a franchisee who’s been economical with the truth or has blatantly lied to you.” The franchisee did get another chance but due to his drinking problem failed to complete even the first term of the agreement and was then terminated. 

Backstabbing the business network 

A franchise agreement is a document franchisees must read and follow to avoid the unpleasant consequences of a possible breach. Additionally, many franchisors have regulations in place to be adhered to. In one such instance, a franchisee refused to fill his client information into Hellewell’s CRM system. “Within the first week we noticed that they were a little bit rubbish at putting the information into the right place so we explained it repeatedly,” Hellewell says. This process was essential because every client was asked to sign a checklist after the service was provided to ensure customer satisfaction. “After about four months we got an email out of the blue from the franchisee saying: ‘This isn’t what I expected. This system you’ve got is a bit of a nuisance. My plan was to work in the business for a few years and then set myself up independently once I got all the knowledge, skills and expertise that I could extract from the franchise. Now that you’ve got all my client data makes this impossible for me.’” Gobsmacked by the audacity of his franchisee, Hellewell fired back with an email of his own. “So we said: ‘In that case mate, you need to disappear now. You need to buy yourself out of the remaining term of the agreement.’ That man was a complete idiot who didn’t understand what a franchise agreement actually meant in real terms.” The franchisor ensures every franchisee gets a physical copy of the agreement but it’s up to them to read it. “We do things absolutely 100% down the line when it comes to ethics but franchisees must do the same,” he adds. Eventually the contract was terminated after the franchisee paid the remaining amount. 

Becoming the scapegoat

The bad experiences Angela De Souza, founder of Women’s Business Club, the franchise for female entrepreneurs, had with franchisees were so severe they saw her give up on the idea of franchising completely for a few years. One of her nightmares was when a franchisee got too greedy which caused the franchisor a bad reputation that hampered her business altogether. One of De Souza’s franchisees was so unhappy with the initial returns that she ended up over-promising to her clients leading De Souza in a pickle. “She started getting very bitter saying the model doesn’t work,” De Souza recalls. “Because of that she started selling packages but when it came to delivering she started complaining as she didn’t have the time. She then wanted to terminate the agreement and I released her from the contract because she was doing more damage than good.” Unfortunately, the franchisee stepped on the franchisor’s toes and didn’t give the clients a refund. “So my reputation in that particular territory got ruined because they blame me,” she says. “I should’ve got a solicitor involved for the sake of the people because now she’s got a job somewhere but I’m the one living with the damaged reputation.” Wiser from the experience, De Souza now ensures she thoroughly scrutinises potential franchisees before recruiting. “The biggest challenge is how do you get people to love it [and] treat it with the respect that you do because it’s your baby but to them it’s just a job.” 

See you in court

The first prerequisite when recruiting a franchisee, apart from checking their drinking habit, is assessing their ability to follow a tried and tested formula. In another bitter experience, De Souza was taken to court and asked for the franchise fee back. A woman with two franchisees, although passionate, chose to ignore the handbook and freestyle it. “She started producing her own creatives for advertising and marketing, which was not only different from ours but also bad quality and was handing them out to people,” she recalls. “When I visited her club it didn’t feel like my company but a knock-off version. When I told her to stick to the handbook, she got angry and said I was micro-managing. She took me to court, she wanted all her money back and it got really ugly.” In her case, De Souza won as her reasons were legitimate. However, going to court should be the last resort for every franchisor or franchisee given the unnecessary costs involved. De Souza adds that even though a franchisee has the best of intentions, they can’t ignore basic regulations. “There’s always teething problems in a business,” she continues. “I start with basic human kindness and 99% of people will respond well to a kind word. But I’ve learned that you can’t help everyone that way.” 

About the Author

Varsha Saraogi

Varsha Saraogi

As junior feature writer and a recent MA Journalism graduate, Varsha has joined the Elite team to fuel her passion. Along with being immersed in the money making sector and ranting about women’s rights, she will be hunting for news about everything business related. And burying her head in economic magazines. Follow her on twitter at @msvarshasaraogi for her mundane musings.

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