Making Franchise Advisory Councils Work — A Review of the Current Landscape

by Greg Nathan, Managing Director,
Franchise Relationships Institute

This article is extracted from “How to Make Franchise Advisory Councils Work”, published by the Franchise Relationships Institute.

Changing Expectations over Consultation

Institutions today are increasingly driven by the needs and expectations of their stakeholders rather than just the agenda of those in positions of power. Dictatorial approaches to decision making are being replaced by more consultative methods.

For example employers wanting to retain good people are learning they need to look after their staff, treat them with respect and give them more autonomy and flexibility. Government departments are trying harder to provide taxpayers with more efficient and accountable services. And of course, in marriage and personal relationships the rules have certainly changed with a levelling out of roles and responsibilities around the home.

While franchising has its own unique relationship dynamics, franchisors and franchisees can draw lessons from these shifts in community attitudes. As expectations around the sharing of power and information continue to evolve, franchisors operating from a dictatorial philosophy of “we know best, just do what we tell you” will increasingly learn that this is not sustainable and they need to get with the times. Franchisees also need to take heed of this trend. Those who think they can bully their franchisor into submission whenever there is something they are unhappy about will also find this is increasingly not a viable option.

In our research with thousands of franchisees we have found that, while franchisees enjoy their work, generally have good relationships with their franchisor management team, and are happy with the competence and commitment of top leadership, they are far less happy about the extent to which they are listened to.

For instance, while 92% of franchisees say they enjoy their work and 86% agree that, generally speaking, they have a good relationship with franchisor management, only 61% believe their franchisor respects their opinions or that there are avenues in the franchise system to express their ideas and opinions.

Clearly there is a great opportunity waiting here.

Franchise Advisory Councils as a Vehicle for Greater Consultation

The Franchise Advisory Council or FAC is a concept that embraces the view that franchisees, with their extensive front line experience and vested interest in the franchisor’s decisions, can make a valuable contribution to the development of effective strategies and operational guidelines. Because they seek to harness franchisee views in a systematic manner FACs are also a proven way of encouraging frank, honest communications between franchisees and franchisors.

For this reason FACs are now generally accepted as a desirable initiative to promote a healthy form of consultation with franchisees. Indications are that the clear majority of established Australian franchisors with over 30 franchisees have some form of FAC. The benefits of an effective FAC, as cited by franchisors and franchisees, are impressive and include the following.

1. Because FACs encourage more transparent decision-making processes they increase a franchisor’s accountability.
2. They improve communication throughout the system, between franchisor and franchisee and between franchisees.
3. FACs create greater franchisee receptivity to change by promoting involvement, improving understanding of the rationale for the change and ensuring franchisee concerns are addressed.
4. By improving transparency, communication and involvement FACs also improve trust, commitment and a sense of ownership over the brand and a franchise system’s strategies.
5. FACs can also save franchisors and franchisees significant time and money by minimising the need for legal intervention to resolve conflict and the resolution of conflicting needs.
6. There are many stories of how new product and promotional ideas have been developed, refined and tested through FAC processes, thus ensuring greater success, probably largely through the greater level of commitment by the network to make these work.

Downsides and Pitfalls

Despite the many potential benefits to both franchisors and franchisees of a well run FAC there are downsides and pitfalls, especially if the FAC fails to perform. These include:

• A slowing down of decision making while discussions and consultation occurs. This can be frustrating for all parties.
• Franchisees may feel disappointed or disillusioned by an apparent lack of tangible “wins” through the FAC. While improvements in communication, trust and commitment are worthwhile in themselves, it is sometimes difficult to articulate how these will result in more sales or less costs, the focus of most franchisees.
• Franchisors may feel despondent or disillusioned when hot topics are raised which involve them being criticised for their lack of performance. Franchisees have little tolerance for franchisor behaviour which is seen as incompetent, unethical or self serving.
• The parties might come to a stalemate over rights or how much power the FAC has to make or influence decisions. For instance, one study highlighted different perceptions of franchisees and franchisors over the power and influence of the FAC. Franchisors tended to see FACs as advisory bodies with a focus on operational issues, while franchisees saw them as also having the power to make decisions on policy and strategy. Such differences in perception are a recipe for conflict.
• The process can become overly political rather than commercial in focus with FAC members feeling that their prime responsibility is to represent the interests of their constituents rather than to influence sound commercial decision-making.
• Where FAC members are elected by franchisees, the franchisor may not work well with these people.
• Communication channels to the network can become confused, especially if franchisees feel it is their role to communicate with their peers. Often their messages will be inconsistent with the franchisor’s messages.

It is our opinion that the biggest potential risk can be summarised in one word — confusion — more specifically confusion over roles, responsibilities, power and communication. Much of this Guide provides the tools and strategies to prevent such confusion from undermining the performance of your FAC.

Given that confusion does creep into the functioning of many FACs, franchisees who are not on the FAC can become suspicious of its intent and value. Indeed, many FACs have developed a reputation as being “toothless tigers” or committees of “nodding dogs” that exist at the behest of the franchisor. This perception can lead to a push for franchisees to establish their own independent association.

For more information about the book “How to Make Franchise Advisory Councils Work”, or to order yourself a copy click here.