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Chapter 9. The Dynamics of the Franchisee–Franchisor Relationship

Chapter 9. The Dynamics of the Franchisee–Franchisor Relationship

What separates the great franchises from the mediocre? What makes some franchises hum like a finely tuned engine and others sound like a broken record? Our belief is that beyond all the systems, spreadsheets, and technologies, the fundamental success factor for franchises is an understanding that the franchisor–franchisee alliance is an intimate business relationship. This leads to our discussion of the dynamic relationship between franchisor and franchisees and the important role it plays above and beyond all the quantitative material and data that comprises the “potentially successful” franchise. Relational dynamics is the way in which the franchisee and franchisor interact to exploit opportunities, handle conflict, communicate about current operations, and plan for the future.

The subject of conflict in franchising is well documented in the press. Almost 50 percent of all franchisors are in a lawsuit at any given time. Thirty percent of franchisees are unhappy enough with the relationship to consider severing it. Conflict is not totally unhealthy for any business. Questioning, probing, arguing, and even fighting can sometimes produce very healthy results. Pizza Hut had dramatically contentious relations with its franchisees in the late 1970s that led to a revised license agreement and a successful new launch of its pizza-delivery program. However, when conflict reaches the courts, it drains time, talent, and money from a franchise system, and conflict at that level seldom results in a healthy relationship going forward.


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