who really wears the pants seminar
DESCRIPTION
Slides from a presentation on who has the power in a franchise relationship. Griffith University, Brisbane, Australia.TRANSCRIPT
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Franchisor vs FranchiseeWho really wears
the pants?
Professor Lorelle FrazerGriffith University
Jason GehrkeFranchise Advisory Centre
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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’
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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
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Themes we explored
• Who holds the power?• Are franchisor / franchisee goals in alignment?• Is franchising a ‘partnership’ arrangement?• Main causes of conflict
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What we found
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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
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Nature of power
• Perception– Each side thinks the other has the power
• Reality– Agreements are written in franchisor’s favour
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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
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Nature of the relationship
• Partnership• Employer-employee• Master-servant• Commercial marriage• Contractual relationship
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What causes conflict?
• Poor performance of franchisee’s business• Poor communication• Change• Fear mongering by franchisees• Third party interference• Disagreements about marketing
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The role of the founder
• A reason why some people join franchises• Founder’s role changes over time• Replaced by ‘Head Office’• Franchisor arrogance
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“This would be a great
business if I didn’t have to
put up with the franchisees”
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Franchisee selection is the key
• Have you ever heard the following?
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I’m not suitable for franchising.
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Franchisor’s responsibility
Put your golf clubs away. You won’t be needing them for the next
5 years.
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Definitions
Source: Macquarie Dictionary
• Ability to influence the behaviour of others;• A function of dependency (importance, non-subsitituability, scarcity)• Ability to influence the allocation of resources;
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5 Bases of Power
1. Coercive Power – based on fear;2. Reward Power – based on the ability to distribute
rewards that others view as valuable;3. Legitimate Power – based on position of
authority;4. Expert Power – based on special skills or
knowledge;5. Referent Power – based on desirable resources
or traits;French & Raven
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Franchisor Franchisee
Coercive Termination; Supply Media; Association; Royalties
Reward Awards; Royalty scale; Concessions; Renewal; multi-sites;
Financial; Reference, FAC
Legitimate Franchise agreement;
Brand owner;
Franchising Code; TPA;
Expert Product/service innovation Product/service innovation; Practical experience; market knowledge; Brand implementer
Incompetence;
Referent Role model Role model
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Franchise Population & Power
Power per franchisee
Total franchisees
X
X
X XX
X
X
X
X
X
X
X
X
X
X
X
XX
X
XX
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Time
BEFORE DURING AFTER
A model of franchise power over time
Copyright, Jason Gehrke 2007
Franchisor
Franchisee
Established,
Growing
Mature
New
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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
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Path to an MBA
• Franchising course at Griffith (July 2002);
• Postgraduate Diploma (4);• Graduate Certificate (+4);• Master of Business
Administration (MBA) (+3)