However, it’s important to understand that franchising involves operating within the framework of an established system and brand. Success depends on appreciating this structure, learning to follow a proven business model, and effectively monetising it.
However, I have come across situations where franchisees have gone ‘off piste’ and have started operating outside the guidelines of the franchise agreement and manual. This may be a deliberate attempt to undermine the system but in most cases, when we sit down with them, we discover that their actions were entirely innocent. They often didn’t realise their approach could cause an issue and potentially risk the terms of the franchise agreement being breached.
One successful baked goods food franchisee comes to mind. They also owned a separate, non-competing food business that wasn’t performing quite as well. To boost sales, they began to sell the franchise’s baked goods through both brands. While this certainly showed initiative, they didn’t realise that this approach would be problematic from the franchisor’s perspective.
The franchisor became aware of the issue when ingredients purchased did not match up with the franchisee’s reported sales. This raised serious concerns, as the franchisor had no audit control over the baked goods being sold through the other brand. Point-of-sale presentation, food hygiene, and customer service standards were outside the franchisor’s control which presented a risk to consistency and the brand’s reputation.
When I work with franchise brands, I often use this example to highlight the importance of training franchisees in compliance. I think it’s essential that franchisees are not only trained in how to run the business but also in how to be a franchisee. Franchisors need to provide clear guidance through the franchise agreement and the operations manual, and explain why sticking to the rules set out is critical. By helping franchisees understand why these boundaries exist – not just what they are – we can reduce unintentional breaches and support a more consistent, successful brand experience.
Franchisees who are excited to join a franchised brand are also responsible for their own due diligence. While enthusiasm for a concept is great, it’s also essential to read the small print and fully understand what’s involved.
From a franchisee’s perspective, it is essential to take the time to thoroughly read and understand the franchise agreement and manual. Following the rules is not only the fastest, proven route to success, but also ensures that the business operates within parameters designed to protect the brand. Therefore, before committing to buy a franchise sitting down with an experienced franchise lawyer to go through the franchise agreement is a must for any prospective franchisee. I typically advise franchisors to ensure new franchisees sign a form stating that they have read and understood the terms of the agreement before they begin trading.
Franchisors must manage their franchise networks with consistency and should avoid favouritism. If a franchisee does not adhere to the rules, the franchisor must take appropriate action, irrespective of the status of that franchisee. Failure to do so can undermine the integrity of the franchise network, both operationally and potentially from a legal standpoint. Maintaining openness and transparency in communication with all franchisees helps build trust and ensures consistent, fair management across the brand.
Prospective franchisees should also take time to assess the people behind the brand. Are they reasonable? Are they open to innovation, or will they only stick rigidly to the rules? Since franchisees are entrepreneurial by nature, it’s worth asking yourself: will I be able to conform with the required structure and standards enough? One of the best ways to find out is to speak directly with existing franchisees in the network. Those conversations can reveal much about the culture and expectations of the brand.
On the other hand, franchisors can motivate franchisees more effectively by providing avenues for them to express their views and ideas. If a franchisee’s enthusiasm for innovation is consistently blocked, it may lead to disengagement and frustration, making them less likely to comply with the franchise guidelines. Encouraging open dialogue helps keep franchisees invested and fosters a sense of ownership, which ultimately benefits the brand.
