When any key player in a business falls seriously ill, its certainly cause for some sleepless nights. But when it’s a franchisee who is in a bad way, it can potentially threaten the health of the entire network. That’s why making sure there are certain provisions in place to support the franchise through this difficult time is absolutely vital.
Obviously the relationship between a franchisee and franchisor is not the same as that of an employee and employer. “Frankly the franchisor has no obligation to look after somebody’s business for them,” says Andrea Loasby, director of Aspray, the property repairs and insurance claims management franchise. This drives straight to the heart of the argument that surrounds dealing with sickness in franchisees – as business owners, franchisees have a responsibility to manage their own affairs and may not appreciate excessive interference from a franchisor. “Franchisees should already have the facilities to deal with illness and sickness – whether it be short-term, medium-term or long-term,” Loasby says. “The onus is on them.”
However, Dave Lister, FD of X-Press Legal Services, urges caution; whilst it might be tempting to think you can simply wash your hands and disregard a franchisee’s problems, this would be a rather short-sighted approach. It may be a franchisee’s obligation to make provisions in case of long-term health problems but if they fall ill and a location’s performance begins to suffer, they won’t be the only ones that are hit in the pocket. “Apart from the disaster that’s unfolding in front of you, you have to worry about upholding your brand,” he says. “What you don’t want is for the brand to have a bad name because the service was not up to scratch.”
Striking the balance between respecting a franchisee’s autonomy and providing the support required to keep the network in shape can be a tricky tightrope to walk. But appropriate planning can help ameliorate the worst of this. “Every business owner should have a business continuity plan,” says Loasby. Essentially this will entail the creation of a plan B that will detail how a franchisee will keep the business running if they are incapacitated. “What’s the back up? What’s the succession plan?” she asks. “Business continuity planning should form the basis of the due diligence and the considerations made when setting up a business.”
One of the most important provisions will be arranging who will manage the business in the interim. “You would expect there to be cover in place,” says Loasby. “Possibly a deputy manager would step up to the mark on a temporary basis.” Subject to the agreements they have entered into, the franchisee may be able to choose who they would like to manage their territory should they be taken ill. “But you would also expect a franchisor to be kept informed of what’s happening because they would want to make sure that whoever was covering is entirely suitable to run that operation,” Loasby adds.
However it may be that there isn’t someone waiting in the wings that can pick up the reins; relatives, for example, might struggle to step up whilst dealing with all of the pressures that come with taking care of a sick loved one. Lynne Lister, MD of X-Press Legal Services, recalls a time one of its franchisees had a severe car accident. “We obviously had to support his wife and children by helping them keep the business running,” she says. Fortunately X-Press Legal Services had a system in place to help them keep the business on its feet and maintain a continuity of service. “Basically we put one of our head office staff at their disposal for them as long as they needed it.”
In territory-based franchises like X-Press Legal Services, there is another solution that franchises can put in place. Lynne Lister makes reference to another franchisee whose infant child was taken very ill. “The baby was in hospital for about three weeks in intensive care; it was a very tough time for that family,” she recalls. Fortunately, a neighbouring franchisee was able to take on her territory and help keep the franchise on its feet. “In all honesty, our head office didn’t even have to get involved because she ran the entire business on top of her own.”
Regardless of who a franchisee has agreed will take over the franchise if they fall ill, this isn’t the only provision they need to make. Insurance will inevitably be a vital part of protecting a franchise. “Critical illness cover and key man insurance should definitely be part of your business continuity plan,” says Loasby. Essentially, critical illness insurance will cover a franchisee’s living costs and potentially pay for someone to temporarily step in and manage the franchise, whilst key man insurance will keep the business on its feet in cases where the franchisee passes away.
But in some situations – regardless of the provisions in place – the franchisee or their next of kin simply may not be able to keep up with the expectations put in place by the franchisor. “If they aren’t able to perform the role expected of them or maintain turnover, then it’s entirely possible that the franchisee is in breach of their agreement,” says Loasby. In these circumstances, there are three approaches a franchisor can take. “Either the franchisor will take a view that they want to hold on and help the franchisee as long as they can, the franchise will go up for resale or the franchisee would resign,” she adds.
But Lynne Lister recommends not being too rigid in sticking to the letter of a franchise agreement when a franchisee is in a difficult way. “When someone rings in and says ‘there’s been a terrible accident, he’s in hospital, I don’t know which way to turn’, the last thing you want to do is start quoting franchise agreements at them,” says Lister. “It’s all about dealing with people the way that you would want to be treated.””
