Every franchisor tells you that the most important single factor
in their company's success is the relationship they have with the
franchisees. This relationship is like a partnership, or a marriage
- the two parties are dependent on each other for support, encouragement
and mutual achievement. Rewards are shared.
This acceptance of the interdependent nature of franchising is
not obvious if you look at any franchise agreement, which is always
slanted in favour of the franchisor in order to preserve the integrity
of the franchise system from wayward franchisees. Nonetheless, experienced
franchisors know that while the legal agreement sets the expectations
of the parties and creates a framework for the relationship, it
does not reflect the way in which the parties actually need to act
towards each other in order to build successful businesses for both.
Good relationships are built up over time as mutual trust and respect
grows between the parties, and this cannot be legislated for. Nonetheless,
there is one formal structure which can be put in place which will
not only help develop good relationships but will also make the
whole system stronger and quicker to respond. This is the Franchise
What To Consider
In general, there are two types of franchisee body. The first, a
Franchise Advisory Council, is established by the franchisor as
a means of increasing communication and consultation, and harnessing
some of the energies and ideas of franchisees for the common good.
The second type is what might be termed a 'franchisee association',
and happens when franchisees feel they have to band together in
order to protect their rights (or their perceived rights) against
the franchisor. It goes without saying that the first is infinitely
preferable for all parties.
A franchisor should plan to establish a Franchise Advisory Council
very early in the system's growth. In some systems it doesn't take
long before some franchisee decides that he should be leading a
franchisee pressure group, so be prudent and allow for such human
behaviour and make sure that you use it to your and the system's
advantage. Make provision for the formation of a FAC in your Franchise
Agreement and write up the constitution and rules in your Operations
Manual. This way, all franchisees will know that the objects and
working methods of the Council will have been conceived with the
best intentions in mind.
In these rules the franchisor may wish to ensure that the majority
vote of the FAC or its executive committee is to be considered as
an affirmative approval of all the franchisees. This can become
a simplified method of handling the vastly complicated procedure
of bringing about changes to the system when they become necessary.
One of the greatest assets that a franchise system can have is
the sharing of ideas. Franchises have a head start over other types
of business simply from the dynamism created by each franchisee
striving to better his or her outlet's performance. Ideas and ambition
abound. Very often, franchisees can quickly come up with a solution
to a problem that the franchisor has been struggling with for ages,
or can quickly spot any problems with implementation of a new idea
and offer ways of overcoming them. FAC members can also help greatly
with the buy-in of the other franchisees in the system to new ideas
or necessary but unpalatable changes.
It is also amazing how much goodwill and co-operation can be built
by this type of sharing. Some franchisors have been so pleased with
the performance of franchisee members of the FAC that they have
created seats on their board of directors for nominees from their
FAC's. Both sides tend to become very proud and protective of those
seats. When people are on the inside and see the reasons for things,
rarely do they disagree. In addition, they convey this feeling to
However, franchisors should not expect the establishment of an
Franchise Advisory Council to be the answer to everything. Don't
think that you can control your franchisees and make them think
exactly as you do. That is not the purpose of a FAC. The object
should be to assist in communications and to improve the efficient
running of the franchise system with the object of maximising profits
for all parties.
Creating A FAC
There are usually three ways that a FAC can be created. These are:
1. The franchisor sets everything up: appoints the representative
members, fixes the meeting dates, creates the agenda and chairs
2. The franchisees meet and organise everything for themselves.
They may or may not invite the franchisor to attend some of the
meetings some of the time.
3. The franchisor and franchisee jointly put things together,
sharing the responsibilities.
Because when they first join the franchise most franchisees don't
know the intricate operations of the system and are very much feeling
their way, it is best that there is a broad set of guides for forming
and operating a FAC.
The obvious person to organise at the beginning is the franchisor,
usually in conjunction with an experienced consultant. This is yet
another area where you can learn faster and make fewer mistakes
by using the experience of others. However, in the long term a franchisor-dominated
FAC is likely to be less effective, as franchisees will mistrust
it. Similarly, a franchisee-run FAC may not address necessary issues
with the same insight as can be achieved through franchisor and
franchisee working together. This means that option 3 should be
the ultimate goal for both parties.
There are, not surprisingly, several different forms of FAC. For
example, McDonald's have such faith in the selection and training
of like-minded franchisees that they allow them to control the administration
and selection of the type of advertising that the chain does. Their
approach can be summed up as, 'If we can't convince some of our
most experienced franchisees that something is a good idea, it's
probably a bad idea.'
Bear in mind, however, that McDonald's has a lot of experience:
it has worked through many problems, refined many systems and is
very advanced in its running of the business. It takes a long time
to develop such a franchise system.
On the other hand, some franchisors expect their FAC's to act only
as a sounding board - providing feedback on initiatives and advising
the franchisor of situations affecting franchisees. This can be
valuable, but can also lead to conflict.
It is not uncommon for franchisees to believe that the FAC has
the power to make decisions and strategy, whereas the franchisor
regards it as purely advisory - a recipe for disaster. A consultative
approach is often the most appropriate, but the most important thing
here is that whatever the role of the FAC is to be, it must be clearly
set out in advance and understood by all involved.
Whatever the defined role of the FAC, it will need a set of rules.
These rules will usually include the following:
- Who can belong, and for how long?
- How are members selected or appointed?
- What are the objectives of the group?
- Who can be an officer, and what do those officers do?
- How often are meetings held?
- Where are meetings held?
- Who will conduct the meetings?
- What number constitutes a quorum?
- Who will act as secretary, do the paperwork and organise the
logistics and communication?
- Who pays for what?
Who Has What Responsibilities?
As the structure is dynamic and continues to evolve, the rules of
the FAC should change as required. They must also be based on good
franchising principles and not be cumbersome or restrictive.
If the rules allow for the franchisor to appoint members, care
must be taken to appoint a good representative group. Although this
may be appropriate in the early days of a system or FAC, it is usually
better to let the franchisees themselves elect members. This is
not only democratic, but also avoids any possible taint attaching
to the FAC as a body of 'tame' franchisees. Such a suggestion not
only makes a FAC less effective but can also be divisive.
The objectives of the FAC must also be clearly set out in advance
so that the necessary issues can be addressed in an effective and
positive manner. If the objectives are not clear, FAC meetings run
the risk of becoming 'gripe sessions' which will serve only to demotivate
One New Zealand system has the following set of objectives for
- Act to ensure the maintenance of high standards of appearance
and business practice throughout the franchise network.
- Facilitate communication between the franchisor and franchisees.
- Provide a high level forum at which matters of mutual interest
can be discussed with the objective of improving customer satisfaction
and outcomes for franchisee and franchisor alike.
- Provide a member to serve on the franchisee selection team.
- Actively promote and encourage franchisee involvement in the
development of the franchise systems and communicate information
to assist franchisees with implementation of policies and procedures.
- Provide an avenue for the generation of promotional ideas.
Having a written agenda for each FAC meeting also helps to keep
members focused upon these objectives.
Formal leadership is essential for effective functioning. There
should be rules prescribing:
- The number of officers.
- How long a term they serve.
- What the duties of each office are.
- How the officers are elected.
Officers may be elected by their peers, or the FAC may appoint
officers from the elected members. In some situations they may be
appointed by the franchisor (although the concerns expressed above
about 'tame' franchisees still apply).
There are four main areas in which the FAC usually becomes involved:
A useful thought is that where there are specific (and often time-consuming)
issues to be handled, past chairmen can be asked to form separate
advisory committees whose main function is to provide level-headed
thinking based on past experiences.
With regard to franchisor representation, it is my opinion that
franchisors should participate fully in the FAC's and at a very
senior level. In other words, the managing director should certainly
be a member and, if there are two franchisor representatives, then
the next most senior person should be the other member. Franchisor
executives need to be careful to acknowledge that the FAC is the
franchisees' council, and avoid the trap of dominating the meetings.
Franchise Advisory Councils always involve costs - paperwork, minutes,
posting, meeting facilities and so on. Some franchisees will have
to travel from out of town (national representation is very important)
and have transport and hotel costs. The big question is - who should
This can be handled in a variety of ways. Some FAC's set fixed
fees to be levied on all franchisees, some are supported by the
franchisor, and some are a combination of both. A common approach
is for each individual to look after his or her own expenses while
the franchisor provides a meeting facility and the use of their
secretarial team for the administrative work. In a small percentage
of cases, costs are met from the marketing fund.
No matter how the FAC is funded, it is important that the franchisor
is not seen to be holding the upper hand. The FAC should be seen
as a forum in which the main parties in the enterprise can meet
at regular intervals to discuss ways of advancing the franchise
system and therefore the cause of its members.
It is important for all members of the FAC to pull their weight,
but it is especially important that the franchisor always remembers
to follow up and report progress. If the franchisor undertakes to
do something, it must be done. The franchisor has to show that he
regards the FAC as a very important institution and takes its business
seriously. This is one of the best ways that the franchisor can
prove himself, and should result in franchisees improving their
faith in the franchisor.
It is also important that all franchisees receive a report from
each FAC meeting, and that everyone is kept informed. Obviously
there will be some confidential matters, perhaps relating to individual
franchisees, but as decisions are seen to be being made and followed
through, the credibility of the FAC and the whole system will benefit.
When drafting the rules of the Franchise Advisory Council consideration
should be given to all the possible ramifications, especially to
legal issues. For instance, it must not be seen as a price fixing
organisation, or as a club which can exclude anyone from the council
without just cause. It is best to run your rules past a competent
The International Franchise Association (IFA) based in the USA
ran a survey among its members and came up with some do's and don't's
for Franchise Advisory Councils as show below:
Do's and Don't's
- Do have a written set of bye-laws or a constitution that spells
out the ground rules of your council.
- Don't consider the bye-laws unchangeable. Times change, so include
a bye-laws provision for making amendments.
- Do set down some broad goals and objectives for forming your council.
They'll serve to delineate the direction of your organisation.
- Don't limit attendance at council meetings strictly to franchisees,
owners, or top executives. Be sure to invite key people to discussions
concerning their particular area.
- Do have someone responsible for taking minutes at each meeting
and for distributing them to council members.
- Don't let your national FAC get bogged down in a flood of tasks
that can more appropriately be handled by a standing committee or
a regional council.
- Do set an agenda for every meeting and stick to it. It's the only
way to avoid gripe sessions.
- Don't waste the experience of your council's past presidents.
Ask them to serve on a special advisory board, and draw on their
knowledge at appropriate times.
- Do have the franchisor's top management personnel at the meetings
if the franchisor is involved in the council. The presence of lower
echelon people signals to franchisees that their opinions and problems
are not taken seriously.
- Don't invite hassles regarding who pays for what meeting expenses.
Determine in advance which expenses the franchisor will pay and
which the franchisees will pay.
- Do have a follow-up mechanism that keeps council members and non-members
informed of activities. It builds the council's reputation as an
- Don't create legal problems. Be aware of the legal implication
of forming a council and of running meetings.
Unleash The Power
Franchise Advisory Councils make a vital contribution to many of
the world's most successful franchise systems. Research suggests
that about 50% of all systems have an FAC, and the more mature the
system, the more likely it is to use such a consultative group.
If, as a franchisor, you decide to establish a FAC, do not expect
it to be an instant answer for all your problems. Franchisees may
initially be uninterested, shy or downright suspicious until you
show that you value the input of your FAC and take its feedback
seriously. Be patient and accept that it may take a whole year before
the benefits start coming through. Franchisees and staff will need
encouragement during this time to begin thinking of the FAC as an
asset rather than a talkfest. Once everyone gets the picture, the
true power of your franchise system will be unleashed.