Who Really Wears The Pants Seminar

Franchisor vs Franchisee Who really wears the pants? Professor Lorelle Frazer Griffith University Jason Gehrke Franchise Advisory Centre

Research about franchising conflict
Sponsored by the ACCC and Griffith University
Research team: Frazer, Weaven, Wright
Preliminary study to explore issues
Power, control, conflict
Interviewed 15 franchising sector ‘experts’

Participants
3 x consultants
1 x accountant
3 x lawyers
1 x corporate lawyer
1x broker
2 x franchisors
3 x franchisees
1 x master franchisee

Themes we explored
Who holds the power?
Are franchisor / franchisee goals in alignment?
Is franchising a ‘partnership’ arrangement?
Main causes of conflict

What we found

Who wears the pants?
Depends
On the success of the franchisee
On the stage of the franchising relationship
On the ‘size’ of the franchisee’s holdings

Nature of power
Perception
Each side thinks the other has the power
Reality
Agreements are written in franchisor’s favour

Alignment of goals
Franchisor goals
To grow the network
To maximise sales
To make a profit when they sell the business
Franchisee goals
To maximise profits
To achieve a desired lifestyle

Nature of the relationship
Partnership
Employer-employee
Master-servant
Commercial marriage
Contractual relationship

What causes conflict?
Poor performance of franchisee’s business
Poor communication
Change
Fear mongering by franchisees
Third party interference
Disagreements about marketing

The role of the founder
A reason why some people join franchises
Founder’s role changes over time
Replaced by ‘Head Office’
Franchisor arrogance

“ This would be a great business if I didn’t have to put up with the franchisees”

Franchisee selection is the key
Have you ever heard the following?

I’m not suitable for franchising.

Franchisor’s responsibility Put your golf clubs away. You won’t be needing them for the next 5 years.

Definitions
Ability to influence the behaviour of others;
A function of dependency (importance, non-subsitituability, scarcity )
Ability to influence the allocation of resources;
Source: Macquarie Dictionary

5 Bases of Power
Coercive Power – based on fear;
Reward Power – based on the ability to distribute rewards that others view as valuable;
Legitimate Power – based on position of authority;
Expert Power – based on special skills or knowledge;
Referent Power – based on desirable resources or traits;
French & Raven

Role model Role model Referent Product/service innovation; Practical experience; market knowledge; Brand implementer Incompetence; Product/service innovation Expert Franchising Code; TPA; Franchise agreement; Brand owner; Legitimate Financial; Reference, FAC Awards; Royalty scale; Concessions; Renewal; multi-sites; Reward Media; Association; Royalties Termination; Supply Coercive Franchisee Franchisor

Franchise Population & Power Power per franchisee Total franchisees

A model of franchise power over time Copyright, Jason Gehrke 2007 Franchisor Franchisee Established, Growing Mature New

Franchising at Griffith University
Teach franchising courses at undergraduate and postgraduate level
Members of franchising sector eligible to study
Staff have PhDs in franchising
Currently 7 franchising PhDs enrolled
Franchising Australia surveys
Government funded research

Path to an MBA
Franchising course at Griffith (July 2002);
Postgraduate Diploma (4);
Graduate Certificate (+4);
Master of Business Administration (MBA) (+3)

Who Really Wears The Pants Seminar

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