In every franchise system situations will arise where a franchisee is in default of an operating procedure or a section of the franchise agreement. The way you as the franchisor handle these situations can mean the difference between a strong franchisor-franchisee relationship and one that is heading for "divorce". Following the process below will help defuse the situation and strengthen the relationship you have with your franchisee network.
A. The Do's
- Focus on the default, not on the franchisee or the franchisee's staff.
- Review with the franchisee why the default occurred, so that a strategy can be developed to try to avoid future occurrences.
- Discuss how the default can be cured.
- Emphasize to the franchisee the importance of maintaining the operating standards and the impact to the brand of not maintaining them.
- Set up additional training for the franchisee and staff to improve their knowledge base so that standards are maintained in the future.
- Document the default and its resolution in writing.
- Make sure you have well-developed accounting guidelines and controls in place.
- Keep your reporting method simple, regular and easy to provide feedback.
- Make your customer service parameters clear, concise and achievable.
- Create online program request forms so franchisees can ask for assistance when necessary or get approval of items like promotions, advertising and charitable donations.
- Set up Franchise System Advisory Groups that your franchisees can turn to for advice and information (for example, an Advertising Council).
B. The Dont's
- Don't dictate.
- Don't carry a big stick.
- Don't play good cop/bad cop.
- Don't threaten legal action unless it's your last resort and you actually plan to go through with it.
- Don't personally collect royalties or other receivables. Leave that to your area rep.
- Don't promise what you can't deliver. ALWAYS under-promise and over-deliver.
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