My franchisor has priced our products too high. Now what?

Dear Aunty B,

My franchisor makes decisions, like pricing and marketing, based on the territory he owns, without taking the franchisees’ territories into account.

As his territory is in an affluent part of town he is pricing the product out of reach of most suburbs. This is hurting some of the newer franchisees. Is there anything that can be done?

Frustrated and over it

Dear frustrated and over it,

There is always something that can be done. Sometimes it is not so obvious, which means I have no idea. So I asked our franchise blogger Jason Gehrke, director of the Franchise Advisory Centre.

He says the situation is not unusual and that different outlets within the same chain – franchised or company-owned – often have different prices for the same products or services due to a range of factors including occupancy and transport costs, the actions of competitors and the characteristics of the local market itself.

So here is what to do. The first point of reference is the franchise agreement and the operations manual. If the franchisor’s outlets are selling at prices above the recommended retail price suggested for your system, then you should ask for an explanation and point out the consequences on their pricing activity on neighbouring franchised outlets.

From a marketing perspective, if the franchisor’s outlet and other franchised outlets are all operating in a region with the same media coverage (eg. community or regional newspaper distribution area, regional TV station, etc) and are not pooling their resources to maximise their marketing effectiveness, they are missing out on opportunities for economies of scale and increased market penetration.

Another good idea is to form a marketing committee of franchisees with the involvement of the franchisor, so that everyone can have input into future marketing activities both nationally, as well as by regional clusters.

Good luck!
Your Aunty B

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