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Chapter 2. The Franchise Relationship Mo... > Relational Dynamics: How Are Tasks B...

Relational Dynamics: How Are Tasks Best Monitored?

When you shake hands and sign a franchise agreement, what is not being said is this: “If you do everything you’re supposed to do, we can conquer the world. If you do something wrong, we are all in trouble.” A classic example is what happened to the Jack in the Box franchise in 1993. A franchisee inadvertently served tainted meat to a customer, who died as a result.[5] Brand equity was so severely damaged that it took the entire chain seven years to reach the systemwide revenue it had achieved prior to the incident. These types of unfortunate situations can have far-reaching repercussions not only for the individual franchisee, but also for both the corporate franchisor and other franchisees. If and when such scenarios occur, the depth of the franchisor–franchisee relationship is tested with potential solutions ranging from renegotiating license agreements or contracts to litigation in the worst case scenarios.

The Jack in the Box example is at the extreme. Most conduct detrimental to the franchise is much less significant—slightly slower counter service, dirty restrooms, inventory shortages—but nevertheless gnaw away at brand equity. Franchisors of all sizes and ages can make decisions that prove detrimental to their system. At one point, Ray Krok, the legendary founder of MacDonald’s, insisted that a “hula burger” be introduced in MacDonald’s restaurants. Franchisees lost a lot of money on the pineapple-covered hamburger that never gained public acceptance. Sten-tel was a burgeoning franchise that used patented technology to offer clients the ability to outsource dictation. They couldn’t convince franchisees to make technology changes and eventually abandoned their plans to grow using franchising. Indeed, relational dynamics is the active management of the franchisee–franchisor relationship. The process of managing the relationship is both formal and informal. The reality is that if the franchisee or franchisor insists on a very strict interpretation of the license agreement, then conflict is almost assured, and it will likely result in litigation. So, as expectations are established, the partners need to monitor the activities of each other to make sure they are met.


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