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The Gap in Global Franchise Relationships

In a survey conducted by Franchise Mind USA, we found that 50% of Franchisers and 50% of their international franchisees are unhappy with the relationship. While the symptoms of ‘unhappiness’ maybe a laundry list of items on either side, the real causes may boil down to: Expectations and Perceptions.

 

Franchise Relationship Expectations

In the excitement to ‘close the deal’, many times the role and responsibilities of the parties are not clearly articulated or understood. What exactly is the role of the franchisee in developing the business and in meeting the requirements of the franchise? And what kind of support will the franchiser provide and when?

Certainly these items should be spelled out in the franchise agreement, however, neither the franchiser nor the franchisee is refering to the franchise agreement unless and until things get to a point of no return in their relationship. Without clear expectations on the roles, the relationship will be fraught with issues.

Franchise Relationship Perceptions

On top of undefined roles, you add perceptions and now the tug of war begins. Perceptions of how we view and interpret the world is determined by our experiences, our education and our environment. When it comes to international franchising, other dimensions such as different cultures and languages, as well as differences in managing people, a fluid sense of tim
e, difference in what is considered business professional, appropriate response time and a host of other differences that leads to perceptions that heavily impact the business relationship.

 

The franchisee, with these sets of perceptions and many times without a complete understanding of the business has the urge to re-invent the business, wanting to make adjustments and changes that can harm the business. All this is advocated by the franchisee with the belief that ‘in my country things are done differently’. In essence, the franchisee is trying to adapt the business through the filter of their perceptions. While, every good franchiser wants the local perspective, they also want the franchisee to understand the nuances of the business before suggesting changes to the business model.

 

On the other hand, there are many franchisers who approach the global market with their home-country centric view of the world only. Their attitude is one of ‘we are not prepared nor do we need to make any changes to our business model. We’ve been successful doing it our way and that is the only right way’. Ridgity in the application of the business model limits the success of the business in another country and makes it difficult for the franchise
e to succeed with these types of constraints.

Certainly, a franchise system’s strength is its consistency around the globe. However, if the approach was more in line with ‘Think global and act local”, then the sanctity of the “non-negotiable” components of the system can be preserved yet allowing a certain amount of localization. Each franchiser must be absolutely clear on what can and cannot be changed in their system.

 

An effective and harmonious relationship between a franchiser and a foreign franchisee is essential given the physical distance between them. In order for this relationship to thrive, expectations of the business and the role of each party must be totally clear before entering into the relationship.

 

There is no question that before entering a new foreign market, both the franchiser and the new franchisee must have frank discussions as to how the business needs to be localized. An effective strategy will be in everyone’s benefit.

 

As an example, our Pure Nectar 100% Cold-Pressed Juice (www.PureNectarJuice.com) is made locally in each market and as such, we allPure nectarow upto 40% of the product line to be customized based upon local availability of fruits and vegetables as well as consideration for local taste. Of course the franchisee in a new country cannot expect to make decisions unilatterally as to what the 40% of the product line will be as there is science behind the process to determine the right combination of fruits and vegetables. As such, once we understand what supply of fruits and vegetables is available, we work collaboratively with the franchisee to create a local market product line. Without an open mind and the willingness to intelligently adapt the
product to each market, we harm the brand as well as the franchisee’s business.

 

 

 

However, when it comes to business systems and market approaches our attitude becomes less generous towards modification as we want the new foreign franchisee to first understand and diligently apply our business systems before suggesting changes to the business systems. We have found that many times the changes franchisees suggest to business systems are because they don’t want to step out of their comfort zone.

 

As an example, our other brand ácumen Sports, a High Performance Training methoacumend for athletes (www.AcumenSports.com) does not merit any changes for localization as the training is a scientific approach to improving performance. However, when it comes to business systems, even though we feel we have created strong systems, we keep an open mind to suggested change
s for localization, especially when it comes to marketing approaches to reach potential customers.

As a franchiser, we don’t pretend to understand all the business customs in different countries. Instead, we listen to what our franchisees are saying so we can appreciate their local customs to see how our business systems can be best adapted to their situation.

 

Final Thoughts

A relationship requires give and take on both sides. A franchiser must be clear on areas of the business that are ‘off limits” to adaptation and those areas that are acceptable for localization. Franchisers must keep the pride aside and be open to listening to legitimate requests. A franchisee, on the other hand, must appreciate the intricacies of the business created by the franchiser and be judicious in requesting changes of the well-thought out systems. Without full understanding of the business, changes may end up harming the very business you are trying to build.