Franchisors often pride themselves on building a network of driven, entrepreneurial franchisees who share their vision. Yet, even the best intentions can go awry when franchisees are treated more like employees than independent business owners. While the title might exaggerate the number of differences, the core message is clear: franchisees are not employees, and treating them as such can lead to frustration, backlash, and a fractured network.
This article delves into the key differences and why respecting the franchisee-franchisor relationship is crucial for success.
Franchisees are independent business owners
At its core, a franchisee is someone who has made a significant financial and personal investment to run their own business under your brand. They are not salaried staff taking directives; they are savvy business people with autonomy. I wouldn’t go as far as to call franchisee’s ‘entrepreneurs’ in their own right, but they are entrepreneurial people who are required to execute many of the same functions as anyone running their own business.
Franchisees manage their own budgets, hire their own staff, and make operational decisions within the guidelines of the franchise system. Unlike employees, they bear the risks and rewards of their business performance. This independence is the essence of franchising and must be respected by the franchisor and head office team.
Guidance vs. Micromanagement
There is a fine line between allowing franchisees the freedom to operate your system and dictating their every move. A common misstep (and overreach) is when franchisors attempt to control every aspect of their franchisees’ operations. While providing robust support and clear guidelines is essential, overstepping will likely lead to resentment. Franchisees expect your guidance, support and feedback, not micromanagement. For example, offering marketing templates and operational playbooks is helpful, but controlling how every detail must be executed can stifle their ability to adapt to local market needs. Not to mention how much time and effort this takes for a head office team to manage, which in turn costs you money. Also, it’s important to remember that franchisees bring valuable insights about their specific regions, and their input should be encouraged rather than dismissed.
Control vs. Creativity, Where is the line?
Localization aside, much of the innovation in franchising actually comes from the ground level. Indeed, even MacDonald’s own ‘Big Mac’ was a franchisee innovation. So with this in mind, where do you draw the line between allowing franchisees to create, as opposed to shutting them down and ensuring that they rigidly follow the system? Well, similarly with employees, you can facilitate new ideas and foster creativity, as long as it’s done in a way that is measured and respectful from both sides. What do I mean by this? New ideas must be communicated to the franchisor, be given approval to ‘pilot’ and properly thought-through and tested before they are either adopted by or rolled out to the wider network. This is where a Franchise Advisory Council (FAC) can really come into it’s own. An FAC helps to bridge the gap between those entrepreneurial franchisee innovations and head office, without anyone feeling stifled and without franchisees feeling like an employee.
Accountability without employment dynamics
Unlike employees, franchisees are accountable for delivering results within the framework of their franchise agreement. However, the accountability dynamic is different. Franchisors can enforce compliance with system standards but must do so in a way that respects the franchisee’s autonomy.
Treating franchisees like employees by implementing rigid reporting structures or excessive oversight can damage the relationship. Instead, focus on collaboration and shared goals, ensuring that compliance measures are fair and transparent.
Communication is key
Employees expect direction; franchisees expect partnership. Communication with franchisees should reflect this dynamic. Open dialogue, mutual respect, and a focus on shared objectives are crucial for maintaining a positive relationship. Again, an FAC can be a wonderful vehicle for providing this communication channel.
Listening to franchisees’ concerns, addressing their feedback, and involving them in decision-making processes can significantly enhance the sense of partnership. A franchisor who communicates with franchisees as equals fosters trust and loyalty across the network.
Consequences of treating franchisees like employees
When franchisors fail to recognize the distinction between franchisees and employees, the repercussions can be severe. Disgruntled franchisees may feel undervalued and restricted, leading to conflict and even legal challenges.
Moreover, treating franchisees like employees can undermine the entrepreneurial spirit that drives franchise success. It can result in a network of demotivated franchisees who lack the independence to innovate or adapt.
Franchisees and employees both play vital roles in your business, but they are not interchangeable. Understanding the unique nature of the franchisee-franchisor relationship is essential for building a strong, successful network. By respecting franchisees as independent business owners and fostering a spirit of partnership, franchisors can avoid backlash and create an environment where everyone thrives.
So, while this article doesn’t list 101 differences, the message is clear: treat franchisees like the entrepreneurs they are, and watch your franchise system flourish.
