We know what it is …. There are many fees to consider: territorial fees (franchise fees), royalties fees, fees for opening, fees for training, fees marketing, etc. …. An endless list.
What if we instead had two partners, rather than a franchisor or franchisee? What if both partners win or lose?
Fear of the unknown
It’s all about winning. Win-win is the goal. We are afraid. We are afraid to be taken advantage of. Afraid that we will not maximize possible revenue.
Fear is there to keep us safe. Fear protects you from falling down an abyss, from diving into the depths of the sea or walking into dangerous places. The same fear we use to protect ourselves also serves as a limit.
The old lady that has never taken the escalator before, and who freezes at the very first step.
- The child who won’t pedal alone and holds on to his father’s hand. The fear of falling limits their ability to move forward. This same fear of falling, which tells us we should be cautious, also keeps us locked in place and stops us from exploring new possibilities. In business, isn’t this often true?
Partnerships are powerful.
Imagine you’ve just created a F&B business concept that has a replicable, scalable and simple model. Imagine you have been married to your love for 16 years. You met her at school when you were in your teens, and you got married in your early 20s. You and your partner both work in the same field, but you’re looking for an opportunity that would allow you two to achieve everything you have dreamed of as a pair. You have the goldmine right in front of you. You think to yourself, “Maybe my partner could open the stores and run them while I handle the logistics and central kitchen.”
You and your business partner would draft a 70 page franchise agreement. You most likely wouldn’t. You are likely smiling now as you read this, because you know my answer to the next question. Why not? Why would you not need a contract for your business?
TRUST: Taking it to the Next Level
There is TRUST.
Love and trust are the glue that keeps this relationship together.
Wouldn’t you love to trust a franchisee the same?
It is easy to answer: yes, it would look beautiful.
This franchisee isn’t your spouse
You haven’t had enough time to get to know the franchisee and establish trust.
You don’t like your franchisee. You should love your franchisee. You don’t want to leave your partner to marry a franchisee. But you do love like a mother, by protecting and caring. Wouldn’t THIS change the equation completely?
Let’s just agree to the fact that we need a franchise contract. Does it have to be aimed at taking maximum advantage of the franchisee? Would it be possible to create a new kind of franchise agreement that rewards the franchisee for opening more shops, rather than penalizing them when they don’t?
Why not lower the percentage of royalty the franchisees pay as they expand? As the amount of support needed for openings decreases, why not lower the fees associated with opening and training? What about an Airbnb-superhost-like reward that recompenses ‘super’ operators?
Rewarding instead of punishing
A franchise agreement exists to protect a brand’s image, standards and reputation. However, it is often more of a contract that lists the penalties a franchisee can incur for breaking standards. There are few rewards available for franchisees who not only adhere to the standard, but provide unsurpassed customer service.
Some European cities have implemented a “super citizen” scheme whereby citizens who go above and beyond what is required by law, such as segregating all waste, using only renewable energies to heat and cool their homes, and driving sustainable vehicles, will be rewarded. The benefits or incentives for being “sustainable citizens” range from reduced school fees to lower municipality taxes.
This is the direction I think we should take in our business as well – reward instead of punish. We should hold our franchisees’ hands and consider how win-win arrangements could take us both further faster.
Consider expansion carefully
The issue of franchise expansion is a long-standing source of disagreement, as the principals want to expand their business more aggressively than we believe that market will allow. According to logic, opening more shops will increase profits. It is important to carefully study expansion plans, and not only measure market volume but also market spending power.
A franchisee can also work with an operator who is better suited to a sub-region. Both parties will then collaborate on the opening and expansion of new shops. It should ultimately be a win/win situation, as both operators and franchisees have a stake in the success of the expansion.
Collaboration solutions
Bring the landlord of the property into the equation could also prove to be an effective solution. If a landlord benefits from having the brand of a particular real estate in it, he may be willing to offer more favorable conditions for an operator that brings in this brand. Brands can add significant value to an apartment building, and the landlords should take this into consideration when determining their rental values. The lower revenue generated by a particular unit may not represent a negative, but rather an opportunity to increase their market exposure, reduce their marketing costs, and improve their overall positioning.
Each brand, and each region, is different. But I challenge all franchise principals to find ways of working together to the benefit of everyone, and not to try to “outsmart” one another. We must not become like the elderly woman in front of an escalator, and let our fear limit our ability to grow and expand our business.
