The franchise system implies a legal obligation for the franchisor to assist its franchisees in need. This assistance can be technical or commercial, but not financial. If it consists of an obligation of means and not of results, it implies the responsibility of the franchisor.
It is the franchisor who sets the tempo and, faced with a franchisee in an unsettled situation, the franchisor has two options: the less moral but less costly option of getting rid of the failing franchisee, or the option of assisting its franchisee partner by means of various levers.
In the second case, the franchisor will assist the franchisee partner in dealing with his creditors. He will also help him to trim non-essential costs, to organise staff training if necessary... If this is not enough, he can launch additional communication campaigns, and grant franchise fee exemptions.
On what criteria does the franchisor decide to get rid of the franchisee or to accompany him? Why is the franchisor-franchisee relationship an essential element of the subject?
The role of the franchisee
In the event of a breakdown in the activity of one of its franchises, the franchisor, who is obliged to provide the necessary means for the franchisee to develop its activity as well as possible, must intervene. And this intervention can be expressed in different ways depending on the role played by the franchisee.
It is indeed vital to distinguish between two categories of franchisees: those who are going through a difficult period for various reasons - work in the shop area, health problems or other economic problems of any kind - but who have, on the other hand, always shown commitment, reliability and reactivity. These "unlucky" but motivated franchisees are to be differentiated from those with an unproactive, non-invested or even negative attitude. Those who do not respect the franchise "contract" and do not follow the franchisor's advice. In this situation, the franchisor must take responsibility, recognise his "casting error" and take the only possible decision: to push the franchisor into receivership and break his contract.
The different ways of accompanying a franchisee
When faced with a franchisee who is undergoing a challenging situation but who has always shown a willing and involved attitude, it is essential to proceed differently.
First of all, we need to consider the reasons, the source of the difficulties encountered. What is the context? Is it a problem of location? Are the opening hours consistent with the neighbourhood? Is it a cyclical or structural problem? How can the situation be improved?
Once the likely sources of difficulties have been identified and analysed, sometimes after spending several days on the spot, the franchisor will accompany his partner franchisee in his various steps.
He can, for example, help him to analyse his balance sheets to enable him to trim non-essential costs, accompany him in his negotiations with his landlord, banks and creditors.
Depending on the root cause of the difficulties, the franchisor may also have to organise staff training or an internal audit, run additional communication campaigns, waive franchise fees, etc.
The franchisor-franchisee relationship at the heart of the matter
Whatever the type of assistance given to franchisees - commercial, technical, accounting analysis, training - the investment made will very often be at a loss for the franchisor.
Indeed, the costs incurred for these different actions will only occasionally be reimbursed by future royalties. But the respect of this assistance clause is not only an expense, or a constraint for the franchisor. It is also a tool, an asset. It is vital for him to keep his network alive, to ensure that his know-how and methods are respected and applied in each of his franchises. Beyond his cash flow, it is his own commitment that the franchisor implies here, his role of caring for his franchise network.
The various actions implemented to support its partners and help them succeed are known to the other members of the network. They therefore also help to sustain the franchisor-franchisee relationship and to reassure the other members of the network.
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