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No one disputes that there are lucky franchisees in systems where a relationship with a reputable franchisor is repairable when a conflict arises. In this Jason Gehrke article at Smart Company he raises questions as to how astute these operators are when conflict should be resolved and what lessons can be learned to improve the franchise.
Personally, I like franchising when it works well but I cannot discount the inherent ability to abuse this business format and the seemingly irresistible attraction of ‘money for jam'.
Everyone throws out meaningless statistics based in flawed research so here is mine. I estimate that a conservative 6% of franchisees, in Australia at least, are subject to rogue franchising. Where did I get that figure? It is very simply, and loosely, based in anecdotal evidence of reported abusive behaviours of franchisors in Australia over the last 10 years. What anecdotal evidence? Government Inquiry submissions, media reports, contact with franchisee associations, personal exchanges between franchisees from various networks, ACCC reporting and legal databases offer the basis for my 6% where brands have been named as behaving badly.
Conservative? Yes, I do believe that the number may be far greater. Franchising history tells us that the majority of franchisee don't take complaints to the next level. While there is virtually no worthwhile and promoted pre-entry education once trapped; franchisees understand that to go into battle with a franchisor would be a dangerous move as they cannot match the available dollars. Is 6% tolerable? In Australia this figure potentially puts tens of thousands of franchisees in the hands of franchisors that have a behavioural history that indicates the possibility that he/she could steal some or all of at least one generation of franchisees life's savings.
Back to Jason's article. So what happens when anyone takes a franchising complaint to the franchising regulator? The regulator in Australia directs them to follow the Franchising Code of Conduct and participate in Mediation. What happens when the mediation includes a franchisor who will not ‘act in good faith'? They don't have to so it is back to the regulator. What happens then? Under the current regime, any past regime, and probably any future regime the regulator will do nothing. That is evidenced by the recent Inquiry and the failure to instigate even those meagre recommendations.
Generations of franchisees will continue to join the rolling 6% while governments and franchisor representative bodies produce a charade of ineffectual education reach warning that ‘there are bad people out there'. Assuming this is unacceptable to most then is there a smarter alternative to militancy and corporate terrorism?
"Australia is a lucky country, run by second-rate people who share its luck." Donald Horne
Nicholson cartoons from www.nicholsoncartoons.com.au/ with thanks.