Franchising is a marketing concept that can be adopted by an organization as a strategy for business expansion. In a franchise business, a franchiser licenses to a franchisee its know-how, procedures, use of its business model, intellectual property, brand, and rights to sell its branded products and services. The franchisee then needs to pay certain fees and to comply with several obligations, which are typically explained in a Franchise Agreement.
There are many benefits to owning an international franchise business. The core of this business model lies in the relationship between the franchiser and the franchisee. This article is going to list some common situations that lead to conflicts and some methods to establish a harmonious relationship.
Reasons for conflict between the franchiser and the franchisee
Moral differences
The most common type of conflict between the franchiser and the franchisee lays on the definition of the responsibilities of each party. The franchiser and the franchisee should cooperate to enhance and maintain the brand’s reputation, which might be destroyed if the franchisee only chases short-term benefits. On the other hand, if the franchiser seeks profits regardless of the franchisee’s profits, the brand will grow without unharmoniously. Both scenarios can break their cooperation and destroy their business relationship.
2. Quality of the service provided by the franchiser
As some researches revealed, there is often a strong correlation between the franchiser-franchisee relationship and the quality of the service provided by the franchiser. As written in the contract, after the franchisee has paid the required fees, the franchiser must offer several services like pre-opening, on-the-job training, product research and development, advertising investment, and marketing support. Just to name a few. As for the obligations of the franchiser, the franchisee will not be satisfied if these services are not provided and his expectations are not met.
3. Compression of innovation
A significant reason why franchisees are allowed to join the franchise system is that they can supply the whole system with information and data on the local market trends. For this reason, they are very likely to seek innovations in their business ensure that “the operation of a single store is compatible with the local market environment.” On the contrary, to maintain the unity of the system, it is inappropriate for the franchisee to carry out innovative behaviors. Several studies have found that before joining a franchise business, many licensees used to be entrepreneurs. That is why they often have great enthusiasm for seeking independence and autonomy of their franchise store. In this case, the franchiser’s expectations of maintaining the standardization and consistency of the system will clash against the franchisee’s requests for autonomy. Therefore, the franchiser should balance these two aspects of their relationship.
Tips for building up a harmonious relationship
1. Sign a detailed contract: Both the franchiser and the franchisee should pay attention to all the risks and disagreements in their franchise business. The more details and possible cases are included in the contract, the more guarantees they will have to tackle those problems afterward.
2. Reach consensus of the expanding strategy: An expanding strategy is a strategy connected most straightly with franchising. If the franchiser and franchisee could both know clearly with the expanding, including some business circle protection policy, they will not have that much deviation when cooperating.
3. Communication: When problems occur, communication is still the best way to tackle them. Both sides need to understand each other’s needs and requests to make effective compromises.
4. Franchiser’s obligation to provide a platform: The franchiser should always bear the responsibility for building up the brand, provide training and continuous support, control the franchisees, and boost innovation.
5. Franchisee’s obligation to obey the rules: The franchisee should be clear about his position. He or she should also follow the operating rules, keep the business secrets, pay the fees on time, use the brand correctly, and avoid vicious behaviors.
A franchise brand called XIMIVOGUE has set an excellent example in the franchiser-franchisee relation. Being one of the most profitable franchise brands, XIMIVOGUE has opened more than 1,500 franchise stores around the world. With its high-quality products and outstanding after-sales service, XIMIVOGUE has trained senior supervisors to help franchisees running their franchise store both in China and overseas. Thanks to its cooperation with many foreign franchisees, XIMIVOGUE allows its franchisees to own their franchise store and innovate each one of them to some extent.
The relationship between the two sides impacts the whole franchising system. If you want to establish a harmonious relationship, XIMIVOGUE is definitively one of the best franchise companies you can cooperate with.
