Franchisee-Franchisor Issues Strain Relations

Strained relations between franchisees and their franchisors are making the news. McDonald's, Subway, Tim Hortons, 7-Eleven and Jack in the Box are some household names that we've been reading about of late. What are the issues that push franchisees to decide that they must speak up and take action to defend their businesses?

There is always some tension in the franchisor-franchisee relationship. Franchisors rely on royalties, which come from sales [whether or not the franchisee is making a profit], while franchisees are the ones having to make a profit. As the operating environment grows more difficult, that tension naturally increases. And the current operating market is difficult.

Traffic at many chains has been weak. It is no coincidence, for example, that Subway, McDonald’s, Jack in the Box and Tim Hortons are dealing with consistent sales or traffic challenges or both.

...But there is a growing sense that the modern strategy of franchising—refranchising locations and making brutal cuts in corporate overhead—is taking a toll. Many franchisees believe that Wall Street is hurting the franchise relationship.—Jonathan Maze, Restaurant Business

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