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The Tolerance Zone

Franchising is a negotiated relationship in which franchisors and franchisees must live with some degree of flexibility regarding each other’s performance. In essence, the franchisee and franchisor create a “tolerance zone” unique to their relationship, an informal performance standard on many dimensions. No party to any relationship behaves perfectly all the time, so strict interpretation of the license agreement is usually a prelude to legal action. In our experience an hour spent in almost any franchisee outlet will uncover numerous breaches of the license agreement that could result in legal action. By the same token, a franchisee who strictly interprets the license agreement can easily highlight franchisor breaches. The result is a litigious environment that serves no one.

The tolerance zone is defined by a series of services that franchisors provide franchisees. In our professional lives as franchisors and franchisees, we have spent much time understanding the nature of the dealings between franchisor and franchisee that are most important to maximizing the relationship. The following list represents the franchisee’s perception of dealings with the franchisor that constitute the tolerance zone.[2] Many people make the mistake of thinking all they need to do is watch sales and profits, and they can rest assured the system is healthy.


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