Options for Dissatisfied Franchisees

If the rosy picture you’d of running a franchise includes a little tarnish onto it now, this franchise company CEO has some words of advice for you personally.

Suppose you purchased a franchise outlet a couple of years ago. You were only too pleased to fork out the $10,000 to $30,000 upfront franchising fee, because you knew you didn’t know enough to find the business ready to go yourself. You felt it had been worth it to really have the franchise "hold your hands" through the critical first year of operations. Plus they did help . to find your store location, training your employees, establishing your account books, and determining the best places to market locally.

Now, it’s 2 yrs later. The business is certainly going great, and you haven’t asked the franchise company for assist in some time because, frankly, you haven’t needed it. Still, you’re writing checks to the franchisor every month for 10 to 15 percent of your product sales; they’re advertising all around the United States except what your location is; they haven’t added any services in a while; they need you to spend thousands to change your complete store layout without the assurance you’ll receive a dime more in revenue; and there’s 13 years left to be on your franchise agreement. How will you experience your franchise opportunity now?

Dick Palfreyman, CEO of Relax THE TRUNK, a retail franchise chain that specializes in ergonomic business furniture, feels your pain. A former executive of the now-defunct Computerland franchise, Palfreyman has seen firsthand what goes on whenever a franchise lavishes attention on its new franchisees but does not keep its older franchisees happy, challenged and motivated. It ain’t pretty.

According to Palfreyman, an effective franchise always must stay one step before its franchisees’ learning curve, and demonstrate that it is working just as hard as the franchisees to greatly help them succeed because "unless you, then several years in to the cycle, your franchisees will think they know as much about the business enterprise as you do and they’re going to want to know on a monthly basis everything you did to earn that month’s royalty check." In Palfreyman’s view, while franchisees can not be allowed such leeway that "you wind up with a chain of independent stores where everyone’s doing their own thing," they need to be studied seriously and paid attention to, especially when many of them express concern a comparable thing "because, let’s face it, it’s a partnership, and you will need their expertise around they want yours."

For instance, Palfreyman wants every Relax THE TRUNK store around the united states to look simply the same, but "maybe they don’t really have to carry yet products. I’m sure I could sell $2,500 mattresses the whole day in a wealthy community like Greenwich, Connecticut, but I don’t believe that strategy will continue to work in the rural South. I’d better have less-expensive products which will fulfill the local conditions there without looking forward to my franchisees to tell me they’re needed."

Palfreyman also highlights that communication is a two-way street, and that sometimes franchisees have to manage their expectations. Sometimes the items a franchise does that franchisees view as a "burr beneath the saddle" can in fact make a franchise stronger. For instance, of Relax The Back’s 80 stores nationwide, 13 are company owned; the business tests services, policies and procedures in its stores prior to making them open to its franchisees. "A whole lot of franchisees can’t stand the thought of company-owned stores because they’re afraid the franchise use them to contend with its franchisees," says Palfreyman, "but a franchise it doesn’t own at least some stores itself does not have any method of knowing if services, policies and procedures will continue to work before requiring its franchisees to look at them. That’s not likely to build-up the franchisees’ confidence one bit."

Palfreyman disagrees strongly with the idea that franchisees ought to be lieutenants (executing orders) instead of generals (plotting strategy). "We get yourself a large amount of doctors and chiropractors who would like to buy Relax THE TRUNK franchises and hire managers to perform the store. I’m not thinking about that. I’d like ‘take charge’ individuals who want to be intimately involved with the business enterprise, who would like to expand it and take it to another level. Nothing pleases me a lot more than when a franchisee really wants to buy additional stores in his / her area. That informs me I’m doing what I will be doing."

Yet another thing (actually, three things): If you are thinking about buying right into a franchise, listed below are three tough questions you should ask the franchise people (or their lawyers): (1) "I see you have an internet site for the franchise. Tell me, if people in my own franchise territory want to order services or products from your Site, do you want to refer them if you ask me or do you want to sell to them directly?"; (2) "Has your franchise filed all necessary paperwork with the buyer protection department in my own state? If not, is that something you’re expecting me to accomplish within my expense?"; and (3) "If I’m following your franchise program to the letter and somebody sues me because my franchise business is harming them for some reason, do you want to indemnify me and pay my expenses in the lawsuit?"

Cliff Ennico is host of the PBS television series MoneyHunt and a respected expert on managing growing companies. His advice for smaller businesses regularly appears on the "Protecting Your Business" channel on the tiny Business Television Network at www.sbtv.com. E-mail him at [email protected]

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