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How much flexibility should I give franchisees in my franchise system to “do their own thing?”

That is such a great question!  Franchising is a model of system growth that uses independent businesses and independent capital to grow.  To the consuming public, a significant benefit of franchising is that consumers know exactly what to expect from that brand and, in most cases, the customers do not know the difference between the “corporate-owned” and “franchised-owned” locations.  This uniformity is created and developed by the franchisor in implementing the “system standards” of the brand.  Franchise systems strive for uniformity to provide a consistent and predictable product or service to the consuming public.  That is the beauty of franchising.

However, with dozens or hundreds of independent business owners operating the “same” system, a franchisor will obviously experience differences among and between franchisees in the operation or marketing of their independent locations.  Although franchise systems desire to present a uniform system to the consuming public, franchisors need to be careful not to stifle creativity.  Let me give you two examples:

  • In 2004, a franchisee of a large national brand was experiencing slower sales on weekends.  Without franchisor approval, the franchisee developed its own marketing campaign to boost sales.  Other franchisees in close proximity to the original franchisee took notice and implemented the same campaign, with similar positive results.  The campaign was the “$5 Footlong.”
  • In 1972, a franchisee of another large brand had a crazy idea to expand the “lunch and dinner only” menu to include breakfast.  The franchisee developed a breakfast sandwich, marketed it in its locations, all without franchisor approval.  In fact, upon discovering the unauthorized breakfast offerings, the franchisor reprimanded the franchisee and threatened him with penalties for breaching the franchise agreement.  This innovation was the Egg McMuffin.

That’s right!  The $5 Footlong and the Egg McMuffin, two developments that revolutionized their respective brands, were developed by franchisees.  There are dozens of additional examples of these types of revolutionary system developments that were created by franchisees.  Franchisors need to maintain system standards to present uniformity to the consuming public.  Franchisees are on the front lines of customer service and see, first hand, how customers are reacting to the system standards.  The moral of the story is that franchisors need to promote uniformity and consistency, while at the same time, be open to new innovations for the system … which will likely come from franchisees.

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At Fahey Schultz Burzych Rhodes PLC, we’ve been helping municipalities, franchised businesses, employers, and more with their legal needs since 2008. We’d love to learn how we can help you, too.