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Chapter 9. The Dynamics of the Franchise... > Introduction to Case Study: Quick Lu...

Introduction to Case Study: Quick Lube Franchisee Company (QLFC)

When reading about the Quick Lube Franchisee Company, you’ll see the manifestation of conflict in franchising on all four of the dimensions discussed in this chapter. While you are reading the case, we recommend keeping the following four concepts in mind. As a guide, we have provided the general definition of each category in italics and then a hint as to how you will see each in the case. Although the names of people and companies are fictitious, the events are a true depiction of the vastly complicated human and organizational interactions between a growing and profitable franchisee and a franchisor.

  1. Wealth Creation: A view by each player about how the franchise system will help them become wealthy, or at least provide a market return on investment. The change in control of the franchisor almost always causes concern among franchisees. In this case study we see a franchisee who now wonders how the multiple roles of “Big Oil” will cause an unfocused approach to wealth creation for the franchisees.

  2. Communications: Franchising, as a long-term contractual relationship, faces many challenges because both people and markets change. A relationship based on both formal and informal methods of communications is at the core of a relationship flexible enough to last over time. When there is trauma in the franchisor, the field support personnel have to go into high gear with communications. We see little of this from the new franchise owner. The franchisee, QLFC, panics and quickly seeks refuge in the courts.

  3. Brand: How do the franchisor and franchisee value the brand and their collective role in maintaining and building it? When there is perceived fairness in brand-building role definition and execution, then the relationship remains healthy. The franchisor is suddenly the franchisee’s biggest supplier. This is a huge red flag for the franchisee: What brand is going to get promoted, Quick Lube or Big Oil? When there is brand confusion, the franchisees invariably feel stress. Unless there is absolute clarity from the franchisor, this stress is likely to elevate to negative conflict.

  4. Exit Costs: What happens when a franchisee becomes unhappy with the franchisor? She likely looks at the long-term value of the relationship versus the cost of exiting the relationship. That calculation is more measurable than you might expect. A consequence of brand confusion is a lowering of exit costs. If the franchisee believes that the franchisor is diluting the brand (in this case with a supplier brand), then losing that brand and operating under another name is not a big hurdle. This case is a particularly good example of how brand concerns for a franchisee lead to dramatic action. A company with $30 million of revenue suing a multibillion-oil company is a David versus Goliath battle and not a completely rational action!


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