The Laws of Franchising Remain Unchanged
by Ed Teixeira
In the franchise industry there are certain truisms which have remained
virtually unchanged over the years. I refer to them as The Laws of Franchising.
The following are six of these laws.
1. Franchisees Have More Power Than They Think.
Many franchisees feel that if they complain too often, the franchisor may
react negatively. In the majority of cases, this couldnít be further from the
truth. Franchisees that provide reasonable criticism and suggestions to
the franchisor are usually heard, particularly when the feedback comes from
franchisees that follow the franchise program. This doesnít mean that
every franchisor will easily accept criticism, but most franchisors are willing
to accept feedback and suggestions from their franchisees. Often time, a
franchisor will accept suggestions from franchisees more readily than from their
own staff. If suggestions and comments fall on deaf franchisor ears, then there
are larger problems to worry about. Franchisees should recognize that they have
more power than they think and should provide feedback to their franchisor.
2. Franchisees Should Relate To Successful Franchisees.
Fledging franchisees need to relate to successful franchisees. In many cases
the successful franchisees are less visible, choosing to focus their time and
attention on running their business. Many of these franchisees can provide
valuable advice. The new franchisee should seek out successful franchisees and
pay attention to how they operate their business. A new franchisee should be
wary of those franchisees who only complain, unless there is validity to their
3. Franchisors Must Enforce Their Franchise Agreement In Order To Protect The
There is little doubt that a strong franchise agreement, equitably
administered, protects the franchise system. It further protects the
franchisee from those franchisees that fail to follow franchise standards.
Consider the harm to the network and the franchise brand from a poorly operated
location. Successful franchise companies invest considerable time and money to
enforce system standards and protect their brand, which is beneficial to all
4. The Most Successful Franchisees Are Those Who Follow The Program.
Franchising is not fool proof. Obviously, there are certain franchise
systems that are so highly sophisticated and organized that most franchisees can
succeed if they do what they are required to. There are also a number of
franchises that require independent decision-making and active participation by
the franchisee. In any case, franchising is not designed for the creative
entrepreneur or free spirit. The most successful franchisees follow the
franchise program and heed the advice of the franchisor.
5. Profitability Should Precede Franchisee Expansion.
Many franchisees have an unquenchable thirst for territory, looking to open
up another store, location or office before they have reached profitability with
their first location. In a number of cases, the franchisee doesnít have a viable
and profitable operation preceding this expansion. Since itís going to require
capital to develop the additional territory the new or emerging franchisee can
have problems trying to develop more territory.
Franchisees that maximize their existing territory are the ones who will
typically end up being the most profitable and create the greatest amount of
wealth for themselves and their operation. When they do expand, they are in a
much better position to do so.
6. Franchisees Should be Represented by Accomplished Franchisees
I have established a number of franchise advisory councils. In those
instances, the franchisees elected franchisees who they felt would represent the
interests of all franchisees. However, I recall a situation, where several
franchisees campaigned to be on the committee; many of the more accomplished
franchisees were not interested. The franchisees elected six (6) franchise
advisory members of which four (4) were the most outspoken and rebellious
franchisees out of about one hundred and twenty franchisees in the network.
The result was that when we had our first meeting, these franchisees attempted
to promote their own personal agenda, rather than focusing on the concerns of
their constituents. When filling committee and council slots it is important for
franchisees to elect their peers who are successful, articulate and reasonable.
There are certain practices which have been common to the franchise industry
for a number of years. These practices, that I refer to as the Laws of
Franchising are as true today as they were 30 years ago. Understanding and
adhering to these Laws will lead to a higher probability of running a successful
© 2010 FranchiseKnowHow, LLC
Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at