When franchisees go to war with each other

Conflict in franchise relationships is generally considered to be that which occurs between franchisor and franchisee, but what happens when conflict breaks out between franchisees?

Although rare, conflict between franchisees does occur. This creates a unique management problem for franchisors, who are often damned if they get involved, and equally damned if they don’t.

Whether franchisors like it or not, they will be seen as the umpire to resolve any problems between franchisees in a network, and often these problems are caused by issues that the franchisor either did not realistically foresee, or which come completely from left field.

For example, a franchisor recently told me about a disagreement between two franchisees following an awards presentation which resulted in fisticuffs and a surprise spectacle for the other franchisees present. Needless to say the awards will live long in the minds for all the wrong reasons of the people who attended.

Here is a brief outline of common causes of conflict between franchisees:

Inadequate performance

A chain is as strong as its weakest link, so all the strong links have an interest in the performance of the weakest link. While this usually amounts to some friendly advice and encouragement, such peer pressure can escalate unfavourably if the advice is continually ignored or the underperformance of one franchisee begins to cause specific problems for their colleague/s.

Nowhere is this more evident that in the upholding of basic standards of business operation, which the franchisor will generally be monitoring anyway.

However, if through their own carelessness or wilful disobedience of system standards a franchisee arouses the attention of the news media for endangering public safety (e.g. unhygienic operations that result in food poisoning, or vermin droppings in food, etc), then expect the other franchisees to begin sharpening their pitchforks in preparation for a lynching.

Not only are such breaches of health and hygiene requirements inexcusable if the franchisee is operating their business properly, they can generate such adverse publicity as to instantly impact on the financial performance of the businesses of other franchisees.

Through proper reporting and monitoring systems, franchisors should proactively assess the performance of all franchisees to ensure an early intervention if a decline in any element of performance creates risk for the network or adjacent franchisees.

Poaching

Where do franchisees get great staff? From other franchisees of course!

Employers can often feel possessive of their staff if they have trained them and created a highly-skilled and productive employee from raw human material. After investing the necessary organisational resources to create a high-performing employee from scratch, a franchisee is none-too-impressed if that valuable team member is then poached by a fellow franchisee who obtains the benefit of all that training and development.

An isolated incident of poaching may rankle, but multiple incidents involving the same franchisee are bound to lead to conflict, for which the franchisor is likely to be called upon to referee.

Poaching may be more likely to occur in some types of franchises than others, especially those that are highly sales or commission-driven (e.g. real estate), but can occur in almost any employing business model.

Encroachment

Franchisees taking customers or jobs from each other is often referred to as encroachment, and sometimes franchisors share responsibility for encroachment issues as a result of their policies (or lack thereof) in site or territory selection.

If, however, the policies are clearly defined and well-developed, and one franchisee continues to actively promote themselves in another franchisee’s trading area, or actively draws customers away from their colleague, then franchisors should prepare for civil war within the network as either party seeks allies to support their cause.

Encroachment is probably the most common form of dispute between franchisees, particularly service businesses that rely on some kind of territory exclusivity.

If franchisors in such systems ever get their maps wrong and inadvertently grant overlapping territories (which I have seen happen), then not only is there the risk of civil war between the franchisees if or when this comes to light (no matter how small the area involved), the franchisor may also find themselves in strife for their careless management as well.

Unhealthy competition

Most franchise systems have some kind of awards program to recognise high achievers, though the criteria for how awards are granted may not always be transparent or publicised within the network. Consequently, one franchisee may envy the accolades given to another – particularly if he or she believes they actually performed better – and friendly rivalry may develop into something less-than-friendly (such as the fisticuffs example at the beginning of this article).

Inappropriate relations

Many organisations have guidelines dealing with interpersonal relationships between employees in the workplace, but rarely do such guidelines exist for relationships between franchisees.

So if, for example, one franchisee becomes a little too friendly with another franchisee’s spouse or partner at a franchise conference or training workshop, expect that conflict between the franchisees may result. A franchise community is like any community. People will talk with each other and what happens “on-tour” may not actually stay “on-tour” for long.

Franchisors have little or no control over the potential for inappropriate relationships to occur between franchisees and, of course, should have staff codes of behaviour to ensure that no inappropriate relationships are formed between franchisees and franchisor personnel.

Managing conflict between franchisees

The best way to manage conflict between franchisees is to prevent it from happening in the first place. This will require a better management understanding of what makes franchisees tick as humans, not just business operators, and to structure support services accordingly.

At a practical level, if a franchisor team takes a genuine human interest in its franchisees, the causes of conflict above can be identified in advance before becoming problematic for the network.

In recognition of this, some systems seek to minimise conflict by increasing their own transparency, and by introducing practical measures such as improved crowd supervision at large-scale gatherings, closer monitoring of business performance, and discreet ego management.

Not all types of conflicts between franchisee can be foreseen or avoided, but acknowledging that it can occur and preparing accordingly will substantially reduce the potential for distraction and detriment in the network.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for nearly 20 years at franchisee, franchisor and advisor level.

He advises both potential and existing franchisors and franchisees, and conducts franchise education programs throughout Australia, and publishes Franchise News & Events, a fortnightly email news bulletin on franchising issues and trends.