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Changes
to the disclosure provisions of the Franchising Code of Conduct which come into
affect from March 1 should have franchisors rethinking how they deal with
former franchisees.
Under
the new provisions, franchisors will be required to disclose a list of former
franchisees, and their contact details (subject to privacy considerations for
individuals) for the last three years.
The
impact of this additional disclosure requirement can have a profound effect on
the future success of a franchise brand, but in itself, this is not necessarily
a bad thing.
Most
discussion about the changes to the Code have been centred around the cost or
effort required to comply and update documents, but little has been said about
introducing management practices that are conducive to maintaining positive
relationships with former franchisees, who from March 1 will have the ability
to influence potential new franchisees.
There
is an old cliché about franchising which compares it to a marriage. However
differences between a franchise relationship and a marriage are stark. The
franchise relationship is highly documented and defined by the franchise
agreement and system operations manuals, whereas a marriage is based on a few
short vows. Moreover, marriage is still a “till death us do part” arrangement
(even if more than 30% now end in
divorce), but franchising has always been a “marriage”’ which exists for a
defined period of time, and subject to both parties holding up their end of the
deal along the way.
The
point is that when a franchise ends through a term coming to a close and not
being renewed, or through a franchisee selling-up and moving on to something
else, the relationship need not come to an abrupt end. Anyone who has dedicated
several years of their life to running a business under the brand and systems
of a franchisor will still be engaged by the brand, even if they are no longer
part of it. So what then, are franchisors doing to maintain that engagement by
past franchisees?
For
many franchisors focused on growing their networks, this question remains
unanswered. Alternatively it goes in the “too-hard” basket perhaps because
non-compliant, underperforming or unprofitable franchisees have made the
franchisor’s life difficult during the relationship when the two parties had to
work together, and after the relationship the franchisor is relieved just to be
left alone.
But
rather than neglect past franchisees, franchisors should seek to actively
maintain an involvement, through an alumni (for want of a better term), the
purpose of which is to allow franchisees to continue to enjoy their association
with the brand, as well as each other, and act as mentors for new franchisees,
as well as provide more strategic and objective franchisee-centric input to the
system’s development. In such an alumni environment, a past franchisee could
well be elected to a system’s internal Franchise Advisory Council, marketing committee
or both.
There
would be many other ways that franchisors could engage with and harness the
energy and passion of past franchisees if they really put their mind to it –
and perhaps this change to the Code is the catalyst that was needed. A past franchisee
has more power than ever before to impact the future growth and expansion of a
system by positively or negatively influencing the perceptions of future
franchisees. Recognition of this represents great opportunities - and some
challenges - to the sector that astute franchisors will embrace.
Copyright 2008, Jason Gehrke, Director,
Franchise Advisory Centre
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