Franchise Management For Dummies
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The words used in describing things are important because words paint a picture. In franchising, maybe because it’s easy, maybe because the franchise community has become lazy, or possibly because other terms are less understandable or simply too nuanced, you will hear people talk about franchisors “selling” franchises, and franchisees “buying” franchises. However, what is really being offered is a limited license to use another party’s intellectual property for a defined period of time.

Franchises cannot really be sold or bought. Franchises are licenses and therefore are awarded and accepted. The only thing a franchisee owns will be the assets they purchase in establishing and operating their businesses.

Franchisees don’t really own a franchise — they are licensees of another person or entity’s intellectual property.

Maybe because it makes the relationship feel warm and fuzzy, the franchisor-franchisee relationship is sometimes called a family or, worse, a partnership, with the franchisee referred to as a partner or possibly a franchisee partner. Unlike a partnership, though, the franchise relationship is not a fiduciary relationship.

If you think your franchisee is your partner, see if your franchise attorney will be willing to put that into your franchise agreement — none will. It’s difficult to understand why some folks in franchising seem to need to use the term partner at all, as the franchise relationship is a truly beneficial one and doesn’t need to rely on any other term.

Franchising is also often referred to as an industry. And because it has its own trade association and a body of law and culture surrounding it, you can see why. But franchising itself is not an industry. It is merely an alternative method of expansion or distribution used by many diverse industries.

In the same vein, franchisees are frequently referred to as entrepreneurs. An entrepreneur, according to the Merriam-webster dictionary, is “one who organizes, manages and assumes the risks of a business or enterprise.” Although that definition includes most of the attributes of a franchisee, franchisees are not the organizers of the business concept they license and operate, nor do they have any right to independently change it.

The difference between an entrepreneur and a franchisee is that an entrepreneur doesn’t have to follow anyone else’s direction except their own. So, what is the problem with an entrepreneur as a franchisee? After all they have so many of the attributes franchisors want in a franchisee: energy, drive, and ambition.

The problem with a true entrepreneur is that they want — need — to tinker. A true entrepreneur has a clear focus on what they want to create and are not satisfied until they make changes to their business to make it fit their own image. As a franchisor, if you let that happen, franchisees will do their own thing, and your system will never achieve the necessary consistency.

What you are really looking for is a “formula entrepreneur.” Someone who has most of the attributes of an entrepreneur but is willing to follow your lead and understands that consistency throughout the network of locations is essential. Franchisees need to know that they are obligated to meet your brand standards and execute your strategy flawlessly, but still possess the burning desire to own, operate, and manage their own business. Those are the great franchisees you want to recruit into your great franchise system.

Recruiting great franchisees take patience and the willingness to say no to someone who is unqualified to be your franchisee but is willing to write you a check. Turning down a check is difficult — you will need to overcome this difficulty because not everyone who wants to become your franchisee will fit.

Take your time and be disciplined in your approach to recruitment and selection. In the long run, a bad franchisee diverts you from doing productive work and hogs the attention and resources you need to support the rest of your franchisees. The money they pay you will never be enough to make the wrong franchisees worth the effort.

About This Article

This article is from the book:

About the book authors:

Michael H. Seid is the founder and Managing Director of MSA Worldwide, the leading strategic and tactical advisory firm in franchising. Joyce Mazero is a partner and Co-Chair of Gardere's Global Supply Network Industry Practice, internationally recognized and trusted legal advisors dedicated to excellence in franchising.

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