Is there a franchisee in your network who isn’t doing what they agreed to do? Maybe they’ve stopped using the reporting tool you prescribe or aren’t submitting their figures on time. Perhaps they’re simply a constant source of conflict and headaches. Or are they actually breaching your agreement, cutting corners or giving your brand a bad name?
No doubt you’ve already tried having a quiet word, but nothing’s really changed, so you’ve let it ride for a month or two, maybe longer.
I wouldn’t blame you. It’s a lot more common than you might think. The trouble is that doing nothing is still a decision. Every breach you let slide is a choice about how you’ll manage that relationship, and about what the rest of your network can expect you to enforce.
You have three ways forward: tolerate it, terminate the relationship, or mediate the dispute before it comes to that.
Tolerate.
Letting things slide is the path of least resistance. Sometimes it’s a lack of time; sometimes it’s the fear of confrontation; and sometimes the franchisee is one of your best earners, so rocking that particular boat feels like the last thing you’d want to do.
I’ve watched it happen a few times: a network’s biggest earner is quietly allowed to sidestep controls everyone else follows, and by the time it’s addressed, they’ve been trading in the red.
However, it tends not to stop there. There can be an even deeper cost to your wider network, too. Your franchisees talk, and letting one ignore a rule the others follow sets a precedent you’ll later have to explain away. Tolerating a problem rarely means you’re avoiding a conflict – quite often, you’re simply storing it up for later.
Terminate.
Sometimes termination is absolutely right, and if a relationship is genuinely beyond saving you shouldn’t shy away from it.
But it’s a big step: expensive, time-consuming and capable of turning a problem between two people into a much bigger dispute. It can also create disruption for the territory, uncertainty for the wider network and, potentially, a significant legal headache.
The irony is that many terminations could have been avoided if the original issue had been dealt with properly, much earlier.
Termination should certainly be an option, but it isn’t always the first one to reach for.
Mediate.
That leaves the middle ground – and before you reach for it, there’s a surprisingly important question to ask:
Do you really understand your franchise agreement?
Not just the overall message, but what it actually requires when a dispute arises: what constitutes a breach, what steps you’re expected to take and in what order, what it says about dispute resolution, and whether your franchisee understands those obligations too.
An agreement only gives you a useful framework if you actually know how to use it when things get difficult.
Sometimes a dispute can be resolved between franchisor and franchisee once everyone is clear about what the agreement requires. Sometimes, though, it reaches the point where an independent person could achieve more in a few hours than both sides have managed in months.
A neutral third party has no stake in the relationship, so they can bring objectivity to something that’s become personal, help both sides see what’s really at issue, and give everyone the opportunity to demonstrate that they’ve made a genuine attempt to resolve the dispute before deciding what happens next.
Tolerate, terminate or mediate: the right answer depends on the circumstances, the relationship and, crucially, what your agreement actually requires of you.
If you immediately pictured a particular franchisee when you started reading this email, it may be worth talking it through before things become more difficult. I’d be very happy to spend half an hour helping you understand where you stand and what a sensible next step might look like.
Just click the button below to schedule a call at a time that suits you.
Best regards,
Steve Eastaugh
Partner & Director
