The franchising business model has helped build the quick-service industry into a global powerhouse. A panel of franchise experts at QSR’s Dine America conference on Tuesday discussed the importance of having a strong relationship between franchisees and franchisors in order to build brands.
“Within franchising there are two distinct businesses: the business of the franchisor and the business of the franchisee,” said Don Fox, CEO of Firehouse Subs and moderator of the panel. “Each of those businesses and the people in them have their own unique responsibilities to make the whole thing work.”
Fox said that many sour relationships between franchisees and franchisors arise when one side or the other steps outside their responsibilities and the line between franchisee and franchisor becomes blurred.
“Very often a system devolves to the point that there’s a lack of mutual trust,” he said.
Panelist Todd Bertagnole, a franchisee in both the Subway and TCBY systems and president of the TCBY Franchisee Association, said that when he became president of the Franchisee Association five years ago, franchisees’ mistrust of the corporate team had created brand turbulence.
He said one of his first tasks as president was to bridge the gap between TCBY franchisee and franchisor so that the brand could once again have a system of trust.
“The biggest thing I wanted to do was [say], ‘We’re not going to involve attorneys,’” Bertagnole said during the panel discussion. “We’ve got to get along. We’ve got to be able to sit down at the table. That wasn’t easy for our franchisees, and I know it wasn’t easy for the franchisor.”
Bertagnole said one of the ways he helped facilitate a stronger relationship between franchisor and franchisee was by holding a franchisee conference, to which he invited the corporate team. He also invited the franchisor to get more involved and interested in the day-to-day business of the franchisee.
“We encouraged our franchisor to have tough operational standards,” he said. “We wanted our franchisor to be tough, we wanted our franchisor to be our parent, to lead us.”
Bertagnole said that too often, franchisees get caught up in the success of their own stores rather than the success of the brand as a whole.
“Your franchisor has to make money,” he said. “If your franchisor isn’t successful, you’re not going to be successful. You’re both in this together. Sometimes it’s got to be give and take.
“It’s about the brand and where the brand is going, not about the stores. And sometimes that’s hard for franchisees to set aside.”
Michael Ward, vice president of international operations for TCBY parent company Mrs. Fields Famous Brands—as well as its former CEO—was also on hand for the Dine America panel, and said another way TCBY solidifies the bonds between franchisee and franchisor is through comprehensive training programs.
“As a franchisor, we take very, very seriously the fact that our franchisees, by and large, are investing their life savings on our business,” Ward said. “That’s a tremendous responsibility, one that we hold very sacred. As a franchisor, we have the duty of being the most experienced teacher for our brand and to pass those skills on to our franchisees.”
That training includes mock stores at the brand’s headquarters in Salt Lake City, where franchisees can learn the ropes, Ward said. There are also ongoing training sessions every year for franchisees to keep up to date with the brand.
But the training isn’t just for the franchisee side of the business.
“We train our corporate employees about the importance of our franchisees,” Ward said. “Our franchisees’ success is what they need to think about when they make decisions.”
Panelist Harry Rifkin, a partner with the Baltimore-based Franchise & Business Law Group, said the relationship between a franchisor and franchisee goes beyond what is detailed in the initial franchise agreement.
“Depending on the agreement, usually the franchisor has very few obligations other than to provide a licensed name and brand, and to provide an operations manual and training,” Rifkin said during the panel discussion.
The danger of this, Rifkin said, is that many franchisors decide to remove themselves from the operations of the franchisee and only contact them when it’s time to collect royalties and fees. He said he once worked with a franchisee that had not seen a member of its franchisor team in five years.
If the franchisors stay in regular contact with the franchisees, and if both sides work to mutually build the brand, the panelists agreed that any company can thrive.
“When that relationship is there, it’s so much easier to build momentum, it’s so much easier to build sales, it’s so much easier to promote the brand,” Bertagnole said.
By Sam Oches