Who Really Wears The Pants Seminar

1Information Services

Franchisor vs FranchiseeWho really wears

the pants?

Professor Lorelle FrazerGriffith University

Jason GehrkeFranchise 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

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;


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


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



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


Time

BEFORE DURING AFTER

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)

Economy & Finance

Who Really Wears The Pants Seminar