Franchising – A Difficult Task for the Franchisor

Original draft date: September 12, 2009

Delete the idea that the franchisor is at a greater advantage in the franchising business. That franchisees do all the work and supervision in their franchises is not true. In the world of franchising, it is the franchisor that’s having a more difficult time than the franchisee.

Erlinda S. Bartolome, in her article about the problems occurring in the franchisor-franchisee relationship, said that the franchisor is the one that is greatly affected by these problems.  There are times when franchisees will not follow the business system of the franchise. They will rather have their own way, thinking that they know better than the franchisor. For example, they may decide to purchase finished goods or raw materials from a supplier that offered a lower price than their franchisor. Even this single disobedience can wreak havoc on the franchise system. If by chance the products bought from this supplier are poor in quality, customers may no longer buy, not only from that franchise outlet, but also from the other branches. The franchisor is left with the dilemma of maintaining this kind of franchisees or terminating them one by one.

But that is not the only disadvantage of being a franchisor. According to Alex P. Alangco, an entrepreneur and an instructor of Entrepreneurship, the franchisor’s investment cannot be recovered until franchisees are appointed and he starts to receive initial fees and a regular income from them. But unfortunately, some franchisees may try to reduce the amount of their management service fees by not disclosing all their income. Nimfa Alifante, an instructor of Economics, adds that there is a risk that the franchisees may exercise undue pressure over the franchisor to implement new policies and procedures. Aside from that, the franchisor has to disclose confidential information to franchisees and this may constitute a risk to the business.

Many may still be stubborn and refute that these disadvantages are just trifles compared to the great advantage of the franchisor, which is, earningprofits even without exerting an effort to manage and supervise the business. Well, even without the franchisor managing the business but the franchisees, instead, he is left with various obligations that he must attend to. He must stay informed on all matters pertaining to the franchise. In addition, he must also provide suitable training and ongoing support to franchisees. Most importantly, he must endeavor to advance the growth of the small business franchise on behalf of the franchisees.

Having said these, resistance to the fact that being a franchisor is more difficult than being the franchisee is quite illogical. Franchisors are just not being completely vocal to admit that franchising is indeed a difficult task for them.