Franchising

Franchising can be a very effective way to grow a business but like any other business, it presents its own unique set of challenges to both franchisor and franchisee. The use here of the word “challenges” instead of “problems” is deliberate, for the author believes that problems are actually challenges in disguise—challenges that can often be dealt with successfully when approached in the proper perspective. Entrepreneur.com.ph asked franchising expert, Erlinda Bartolome, to share her insights on several challenges faced in franchising.

The challenge: The Relationship of Parties
An intrinsic challenge in franchising is developing a functional elationship between the franchisor and the franchisee, then making that relationship really work. It is important to understand that as established by their franchise agreement, a franchisee is a business partner who invests in the business concept of the franchisor. Thus, although the franchisee owns and operates the business, he or she has to adopt and follow the business system and standards specified by the franchisor.

Typically, however, a franchisee joins the franchise network with his or her own unique business experience, expertise, and outlook. It is therefore not uncommon for a franchisee to have a business point of view that runs counter to the franchisor’s business system, and these differences can be a major source of conflict between the franchiser and the franchisee. The challenge to the franchisor therefore is to convince the franchisee that to succeed in the business, it is best to strictly follow the business system of the franchise to the letter.

The creative solution
To work together effectively and harmoniously, both the franchiser and the franchisee need to fully understand the nature and intricacy of their franchise relationship. Initiating efforts to bring their understanding to this level is, of course, the primary responsibility of the franchiser. On the other hand, the franchisee needs to keep an open mind about the franchise business system even if there are aspects of it that he finds difficult to agree with in the beginning.

The bottom line: The franchisee has bought into a business system that has already proven itself successful using its particular franchise concept. To reap its benefits to the full, therefore, it would be prudent and wise for the franchisee to follow its concept and systems religiously.  
For the long term, both franchisor and franchisee should aim to achieve real synergy in the business. The franchisor has to be continually open to ideas that can further improve the business system of the franchise. In a great many cases, these ideas will be contributed by the franchisees themselves. This is because the franchisees are in the front line of operations and will eventually have many operating insights to share with the franchisor. In fact, many franchises have become highly successful nationally and internationally because they draw strength from this kind of business synergy.  

This article was originally published in the January-February 2007 issue of Entrepreneur Philippines.