What Support Can You Expect from the Franchisor?
By Michael Seid, Managing Director, MSA Worldwide
Remember - It's a Contract
Prospective franchisees need to understand two basic concepts about the support they should expect to receive from franchisors.
- Support Varies. Franchise systems are not fungible, and the support you receive will depend on the industry, the size of the franchisor, the financial capabilities of the franchisor, the culture of the franchise system, and the classes of franchises offered by the franchisor - among a host of other factors unique to each franchise system.
- It's Based on Contract. The franchisor is obligated to provide you with only the support and services provided for in the development and franchise agreements that you sign. Franchise agreements may be Adhesion Contracts. However, they are generally well written; the franchisee is expected to conduct a due diligence of the franchise opportunity supported by legal and other professionals; and you have an opportunity to either negotiate changes or decide not enter into the relationship. Opportunities for courts to impose changes on the terms of franchise agreements are limited simply because of how well most franchise agreements are written. You should never expect more support than what is contained in the written agreements, and it is important before you sign any franchise agreement to read it and make sure you understand what support you will be provided.
While franchise support varies, in most franchise systems you should expect to receive:
Site Selection and Development
One of the most important elements for the success of your business will be the location you select, in those businesses where customers will routinely be coming to you to purchase your products and services. Most franchisors will provide you with information on the type of location you should be looking for and will require you to provide them with information about the site, including its cost, before they approve the location you have selected.
But just because a franchisor approves your site does not mean they are providing you with any assurances that your business will be successful. They are merely telling you that the location is acceptable to them.
You will generally be expected to develop your location to meet the site development requirements and standards of the franchisor, including layout, décor, signage, furniture, fixtures and equipment. While there are several methods franchisors use, most will provide you with a layout that they will expect you to have an architect or builder recast to meet the requirements of your location. After approving your site plan, it will be your responsibility to build out the location to the franchisor's standards, and also to meet local building codes. Generally the franchisor will provide you with a list of sources for the equipment, décor and other items you will need to purchase, and often the sources of that material will be limited. Before you open your business, you will generally need the franchisor’s approval that your development of your location meets their standards.
Initial training can be measured in days or months, and generally will include both classroom and on-the-job training. Increasingly, franchisors are also providing pre-training modules hosted on their Intranet, or requiring franchisees to complete classes and certifications conducted by third parties. Frequently the franchisor will also send members of its staff to assist in the opening of the franchisee's location, and to assist the franchisee in training its employees.
Who will be trained, how long will you be trained, what type of training you will receive, the subjects you will be trained on, and who will be conducting the training will be included in the disclosure document the franchisor will provide to you before you sign your franchise agreement.
- While most franchisors conduct initial training at their headquarters, frequently they may have alternative training facilities.
- While the cost of training is generally included in your franchise fee, it will generally be your responsibility to pay for all travel, hotels, food, and other costs for you and your management and staff while attending training.
- It will be a major benefit to you if the franchisor allows you to bring members of your management and key employees to initial training, and most franchisors will allow you to do so. However, as with all other levels of support, it is important for you to confirm in advance who you will be allowed to bring to training.
One area of growing importance is how the franchisor provides you with training on how to continually provide training to your own staff. If you plan on having one of your management staff act as the trainer for your staff, and your franchise agreement does not provide for a train-the-trainer program, you should request that your franchisor provide that training to your management team.
Remember, most franchisors understand the importance of your being trained, and will be looking to see if you are taking training seriously. This is such an important issue for most franchisors that your franchise agreement will likely allow the franchisor to terminate the relationship if you do not complete training to their satisfaction.
Continuing Training and Assistance
It is important for you to understand the type and amount of continuing support you will receive. Remember, you do not work for the franchisor; you are an independent businessperson operating under a license that requires you to meet the franchisor's standards. You are not limited to receiving support only from your franchisor, and should always consider what other types of support you can obtain in addition to the support you receive from the franchise system.
You will be required to operate your business to meet the brand standards, procedures, and requirements contained in the franchise system’s operating manuals and other brand standard information. However, there will generally be no human resource requirements imposed on your business by the franchisor, with the exception of those dealing with brand standards (dress codes, hair color, tattoos, piercing, language, etc.).
Most franchise systems will provide to you a field support consultant, whose role generally will be to help you improve the performance of your business, and also to ensure that you are operating your business to brand standards. Your field consultant is not your supervisor, nor are they the supervisor of your staff. They are your main source of support from the franchisor, and you should make the time to always meet with them in person and not simply have them meet with your management team.
In other areas, including supply chain, marketing support, replacement management training, new products and services, etc., the franchisor will generally provide that support from their headquarters staff. More and more franchisors are including in their support system an Intranet where you will also be able to communicate with other franchisees in the system, to get advice and guidance directly from your fellow franchisees.
Most franchisors will have regional or system meetings and conventions. In addition to allowing you to meet directly with the franchise system management and staff, and other franchisees and vendors, these are generally one of the most important venues for the franchisor to convey new information and training. Make the time to take advantage of these regional and system meetings when they are offered.
Marketing and Advertising
You should expect assistance and guidance in the type of marketing and advertising you should conduct when you first open your business (market introduction/grand opening). During the term of your franchise, you will likely also be required to conduct local advertising or to collectively advertise with other franchisees and company-owned locations in your market area. Most franchisors will also require you to contribute to a system advertising or brand fund that will be used to support the marketing programs for the system. The minimum amount you will be required to invest in marketing and advertising will be specified in your disclosure document and agreement.
While you are operating an independent business, you are doing so while sharing a brand with the franchisor and other franchisees. Because of that, how you advertise is important to the franchisor and the other franchisees, and you are not generally free to develop and use advertising or marketing materials that have not been reviewed and approved by the franchisor in advance. In addition to pre-approved marketing material, most franchise systems will provide a method for you to submit marketing materials you independently produce for their approval.
Before you enter any franchise system, make sure you understand what types of support the franchisor will be providing to you. It is also important, when speaking to other franchisees during your due diligence, to find out how effective the franchisor is in providing the support. Remember, if the support you expect is not included in your franchise agreement, you should not expect the franchisor to provide it. Make sure to carefully evaluate the services the franchisor is offering before you decide to invest.