Similar to any form of business partnership, the franchisor-franchisee relationship presents significant risks. Once an agreement is signed, possible obstacles and disputes loom in the future.
Avoiding legal battles may be impossible. However, both sides can avoid contentious relationships by learning from history. Not only should franchisors and franchisees know the common disputes that often arise in an agreement, but also be proactive in avoiding contentious litigation.
- Knowledge is power and could be the difference between success and failure. Before signing any document, learn as much as possible about the franchise and the franchisor through research and conversations.
- While passion is paramount, hard questions must be asked. Think beyond the products and services offered. Unwavering devotion can be the undoing of any franchisee.
- Franchisees should have a thorough understanding of the system. Does the franchise focus on a collaborative leadership style? Is there approach with a franchisee more of a run-of-the-mill employer-employee relationship?
- Maintain realistic expectations when it comes to revenue, growth potential and franchise support. Conduct the due diligence necessary on a franchisor’s financial disclosure document.
- When disputes arise, do everything you can to keep the outcome within your control. Once negotiations break down, a judge or mediator will control the destinies of both franchisees and franchisors.
Running a franchise is hard work. Outside distractions undermine the hours put in to build and manage an operation. Fostering a collaborative relationship with a foundation of knowledge and “eyes wide open” can go a long way. Both franchisee and franchisor can reap the rewards that come with success.