Two main trouble spots identified in franchising relationships

Two main trouble spots have been identified in the franchisor/franchisee relationship, reveals new research by Griffith University.

A long term research project into the conflict between franchisors and franchisees has found the first trouble spot takes place early in the relationship at about six to nine months. Lorelle Frazer, director of the Asia Pacific Centre for Franchising Excellence at Griffith University, says franchisees who have had expectations about how much money they would earn and the hours they would work will suddenly find their expectations are not being met.

“That expectation gap can be a real disappointment and occurs particularly if the franchisee is not making the kind of money they thought they would.”

Frazer says that if franchisors are aware this can occur, they can nip this problem in the bud by managing expectations better. “Sometimes franchisees can be naïve, ill prepared and not educate themselves,” she says.

The second trouble spot is when new competitors come into the market. That might occur five years after the franchisor/franchisee relationship begins and can cause stress on the relationship.

The stress at that point can be related to the amount of advertising money being spent, strategy and branding.

Frazer says that she is only partway through the two year research project. “We are trying to look at what causes conflict and what can be done to reduce it,” she says. So far her team has interviewed lawyers, accountants and mediators. “We are yet to gather data from franchisors or franchisees.”

Frazer warns there will be more tension as the downturn worsens. “As people cut back on luxury items it will affect franchises and more stress will be put on relationships.”