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Dispute Avoidance, Warts and All

The healthiest franchise systems don’t waste much time on dispute resolution.  They invested in dispute avoidance.  There has been much written about dispute resolution and conflict damage in franchising and considerably less about avoiding disputes.  While much of this responsibility lay with the franchisor, franchisees play a vital role in dispute avoidance should the franchisor offer the potential for a mutually beneficial alliance.

Prospective franchisees performing due diligence ought to consider whether there are efforts by the franchisor to work toward minimizing disputes.  Dispute avoidance is a living culture and it is either uncompromisingly cultivated from the top or it does not truly exist.  When it does, it is the mark of a quality investment.  The following is not meant to be a definitive recital of all considerations, it is a brief overview meant simply to provoke consideration;


Disputes are predictable in franchise systems where selection processes are poor.  It is not enough to ensure that an incoming franchisee has the funds and the drive. Seriously; prospective franchisees [and master franchisees] always arrive with funds and drive but that does not ensure they will leave a system in the same condition or leave the franchise reputation in a better or worse condition.

Does the prospect have access to enough funds?  This is particularly critical when dealing with Greenfield sites where breakeven is not an exact science.  No matter what the situation the franchisor has the ability to establish ‘worst case’ financial needs.

Are they suited to the industry? Psychological profiling are relatively inexpensive guides.  As example; a franchisee without industry passion or people skills and personality should never be let loose with any brand’s customers.

Are they strong team leaders? Performance, standards and work balance can only be optimized through effective team cultivation and delegation.  Those that are incapable of creating team performance will fail.

There are varying levels of business acumen needed in small business depending on the nature of the business.  If an operator cannot comprehend and control financial performance at the necessary level then the operator and the brand will suffer.  

Of critical importance; are they suited to franchising? A franchisee continually wanting to re-invent the wheel may well be in conflict with what is achievable across a network where consistency of brand delivery is paramount and where patience, cooperation and negotiation skills are necessary assets.  Again; psychological profiling assists but you only have to interpret the background of a prospect to find indicators of whether they do or do not operate effectively in a team environment.

When selection fails then franchisors inherit a high maintenance franchisee and whether the situation can be saved or not; the process is typically lengthy, distracting and expensive.

Failing franchisees plant seeds of suspicion and doubt within a network as a departing franchisee will usually and quite rightfully in most cases share the blame and often raise the support of fellow franchisees and create expensive long-term hell. It is not good enough that a franchisor can point to the shortcomings of under-performing franchisees when those shortcomings should have been obvious in a genuine selection process.

When a focused selection process does not exist and franchisees crash the chances are the franchise is a scam or the franchisor is a loser.    

Franchisee and support representative selection processes go a long way to minimizing disputes when they are designed to.  Field support representatives [including master franchisees] are the face and voice of the franchisor and when they are ineffective or abrasive they have the capability to inflame even minor network issues. They must be relationship builders who can maintain acceptable boundaries and achieve network respect through results.

Too often franchisors, and franchisees, simply cannot grasp the potential of the field support role to produce positive relationships and high performance.  Selecting and equipping these people can be perceived as an expense.  To better appreciate that potential franchisors should consider whether field support personnel are in a position to inflict extraordinary damage to a franchise when they are the wrong people. 

Field support people must be selected because they have a personal brand and skills that fits the franchise culture and the needs.

Induction Design and Goals

Ill conceived induction programs are the norm. Elite franchising systems combine selection and induction as one and that would have to be the best option however; practically speaking, that approach is seemingly out of the reach of most.

Induction programs are typically designed to educate the incoming franchisee as to how the daily operation is to perform in accordance with the operations manual and neglects or shortcuts a golden opportunity to enhance the franchising relationship and create an understanding of how franchising needs to operate to avoid pitfalls and conflict.

Induction is the opportunity to educate incoming franchisees of the roles of both parties to the franchise contract and where support and benefits start and finish and how franchise concept development is evaluated and installed.  

This is the time to discuss what should be to franchisors the obvious causes of friction. No matter what the franchise, there will be a history of issues that have created friction and that invaluable history should become integral to the design of induction programs that allow the franchisor and franchisees to avoid harmful repetition.  

Induction is also a time to openly discuss collaboration, boundaries and dispute resolution.

A great operator does not necessarily make a great trainer or the person to undertake induction of franchisees.  When training results are not forthcoming the trainer needs to be replaced as a matter of the highest priority. There can be no compromise on achieving quality induction results.

The induction of franchise support personnel includes the full induction program for new franchisees while ensuring the representative is given the tools and knowledge to operate to further a quality brand culture and ensure enhanced profitability for all.  They must embrace the concept of healthy franchising and at least have enough working knowledge of related law to know when to get expert advice.  They must understand the franchise contract and the operations manual and the obligations of all parties to both.

These people are the front-line that monitors, maintains and enhances an effective franchise model’s delivery and effectiveness to benefit every participant in the franchise. They trouble-shoot and they must be skilled up so as to be recognised by the network as an accessible asset. They must be recognised by the corporate office as the primary corporate customer and a support infrastructure must be designed to sustain their quick response efficiency.

The goals for all induction training:

                The inductee should be able to hit the ground running and operate to his/her maximum potential within the earliest possible time frame while that induction is designed to minimize confusion and day to day support needs.  When that is achieved disputes are minimized and efficiency is maximized. Distractions from the business of the franchise are eliminated or reduced and everyone stays focused on customers, longevity and profit goals.

Induction is an investment that delivers a return in line with the quality and quantity of content and delivery.

For those systems that deliver little or no quality induction they should consider why McDonalds takes it so seriously and invests so much. There should be no doubt that McDonalds achieves a large return on that investment.

The final element to franchisee induction must involve an exit strategy whether that is concluded to be building the investment for profitable resale or whether it is interpreted to mean a franchisee role change from single-unit operator to multi-unit operator.  Both targets ensure a healthy business for the franchisee and the franchisor.

Minimal induction training is effective for those systems where franchisee profitability and collaboration does not support goals of conflict management and franchisee turnover where longevity of brand is not in the franchisor business plan.


Oh how poorly franchisors can communicate with franchisees even when the goal is not to short-change or deceive. Incredibly poor communication styles reek of hidden agendas or the power message of divine contractual capability.  Lousy or deliberately poor communication with franchisees will inflame and ensure conflict and the detrimental flow-on effects harm everyone.

‘Selling’ the benefits of new initiatives to a franchise network, when they exist, brings with it the cost of transparency but transparency ensures faster take-up, commitment, greater results and minimal complaint.  Suspicion is inherent to most franchising relationships to at least some degree. So why do so many franchisors pour petrol on the firestorm that can be avoided?

All communication with franchisees should be considered from the perspective of enhancing a positive brand culture and maintaining relationships.  That means transparency and where positive upbeat information is shared.  High achiever efforts should be recognized.  Positive franchisee network communication involvement should be enthusiastically encouraged and sponsored.

If transparency requires courage then the franchisor has created an antagonistic audience or there are obvious holes in what is to be presented. Getting caught misrepresenting anything within the franchising relationship creates long-term mistrust that the psyche of the average franchisee, and/or franchisor, will rarely forget.  Franchisees eventually, or quickly, always work out when they have been fooled.

Hard business decisions without general acceptance will be resisted and therefore costly at many levels including the cost of dispute resolution. The vast majority of franchisees will accept tough franchisor decisions when they are convinced that the benefits are in their interests making thoughtful communication style a prerequisite to dispute avoidance. 

Franchisors or their representatives that communicate recklessly without considering the possibility of sending an unintentional message should find a new life.  Franchisees are usually too sensitive and unforgiving when the message can be contrived as different to what was intended.

Franchisees and IndFAs

There can never be enough written or said about the benefits of independent franchisee associations to franchise systems and in the context of dispute avoidance and resolution they represent an extremely reliable and cost saving instrument for both franchisors and franchisees.  The primary goal of an IndFA is to protect and enhance everyone’s investment and to influence such results an IndFA must ensure its involvement is both fair and reasonable so as to maintain a creditable relationship with the franchisor.  The financial health of franchisees is after all, dependant on the financial health of the franchisor [and visa versa].

Existing franchisees should heed at least some of this advice and consider their responsibility within the topics discussed.  Being resident in a franchise network contains obligations to every other participant.  Positive and active participation is the key.

Franchising is a challenge and not for everyone.  If you don’t like it and if you can get out; get out!

Unfortunately many franchisors do not get the opportunity to consider dispute avoidance while they are constantly embroiled in dispute resolution or containing the franchisee foe.  They deal with the stress of constant complaint and conflict seemingly too busy to realize that there is great profit in dispute avoidance protocols.

The mechanics and finer detail involved in these topics will vary from franchise model to franchise model but essentially these topics are central to a relatively peaceful and prosperous franchise model built on the success of working smart to minimize disputes as opposed to an atmosphere of dreaded confrontation.

It would seem that most franchisors simply accept disputes as part of franchising business and while it well may be; that unsophisticated attitude demonstrates a failure to comprehend the size of dispute cost v the size of the avoidance benefit.  They are franchisors that operate in the day-to-day and do not grasp that individual grumblings have the potential to evolve into network complaint before heading into full blown conflict. 

Prospective franchisees should consider whether they really want to invest in a franchise where there is constant bickering or serious conflict whether there was an opportunity ignored to avoid such damage or whether the franchise package contains inherent or designed flaws that lead to disastrous levels of disputes and franchisee turnover.

Know that the franchisee psyche traditionally thrives on complaint. Get to know the difference between standard occupational whine, legitimate complaint and high octane franchisor abuse.  An insight can be gained by questioning and investigating the quality of selection, induction, field support, communications and franchisee network voice.

When a franchise model is deficient in its approach to dispute avoidance there are never simply isolated cases of complaint and failure no matter how well they are concealed in the short-term.  Complaints, conflict and failures can reach expensive plague proportions and if a prospect scrapes the surface in such systems there will always be history.

Tip for Franchisors: the best franchisees, the easiest to select and the easiest to induct successfully that go on to be high achievers requiring less support and proclaiming minimal illegitimate complaint are those that perform the highest level of due diligence.  But be a little wary; sometimes they, or their advisors, investigate and analyse everything except the prospect’s own suitability.

Those that perform minimal due diligence are hard work and will tend to lead complaints because they simply didn't know what they were getting into; and no one told them during induction.  But they are easy to scam.

To Dispute or Not to Dispute Readers; how does your ‘franchise of choice’ rate?

Related Reading:

Franchise Compliance – What Does It Mean?

Royalty Reticence

Desirable attributes of Franchisee and Franchisor

Nathan Profiling

Attributes of Success - Field Managers [U-Tube]

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