One of the disadvantages of buying a franchise is the lack of independence or autonomy in operating the franchise, and the restrictions on decision-making [The advantages and disadvantages of franchising]. How much autonomy a franchisee has in operating their franchise business, will depend on the franchisor, the business operation that the franchisee is wanting to do differently and the reasons why the franchisee is wanting to depart from the franchise offering. While there is a case to be made for some franchisee autonomy, this needs to be balanced with brand consistency .
What is franchise autonomy?
Can Franchisees adapt operational procedures?
Are Franchisees able to introduce new products or services?
What level of autonomy do Franchisees have in local marketing?
Can Franchisees negotiate with suppliers independently?
Challenges of Franchisee autonomy
Strategies for balancing autonomy and consistency
The future of Franchisee autonomy
What Is Franchise Autonomy?
Franchising generally involves structuring the franchise system based on a uniform business model, promoting consistency, effectiveness, and stringent quality management [Why is Brand Consistency Important in Franchising?].
Franchise autonomy refers to the degree of independence and decision-making power given to franchisees when operating their individual outlet. The greater the autonomy the more that franchisees are allowed to operate their businesses in a way that aligns with their local market and customer preferences.
Can franchisees adapt operational procedures to suit local market needs and preferences?
A franchise agreement will almost always require the franchisee to follow the systems and processes of the franchisor (usually set out in the franchise operations manual). There is generally little scope in a franchise agreement for a franchisee to adapt operational procedures to suit local market needs and preferences.
While franchisors do not always strictly enforce these requirements, the difficulty is that if a franchisee does not get the approval in writing of the franchisor to adapt a procedure, then the franchisee may fair poorly in an audit (which may affect the franchisee meeting KPI's) or the franchisee may receive a breach notice (depending on how far the franchisee has deviated from the franchisor's procedures) [What is a franchise breach notice?].
Franchisees are more likely to receive approval from the franchisor if they can clearly demonstrate the rationale behind their deviation from standard operations and how the franchise system stands to benefit from this adjustment.
Are Franchisees Able to Introduce new Products or Services Independently?
Franchisees are generally not permitted to introduce new products or services independently within a franchise system. The franchisor typically provides guidelines on which products or services the franchisee is authorised to offer. As outlined in the franchise agreement, franchisees are obligated to adhere to the approved list of products or services determined by the franchisor.
Yet, franchisors acknowledge that franchisees may have a better understanding of the local market's needs and preferences compared to the franchisor, especially in cases where the franchise is not a local brand.
Consequently there are a number of examples of franchisees introducing new products or services to a franchise system with the approval of the franchisor and within the guidelines set by the franchisor.
These products and/or services are normally trialed and tested before being introduced either at the local level or to the franchise system as a whole.
McDonalds is a well known example of franchisee innovation leading to new products being introduced into the franchise system. The Egg McMuffin was developed by a franchisee and allowed McDonalds to start to market breakfast items.
However, there are also many examples of franchisees being required to remove products or services from their offerings because they were not franchisor approved, and/or the products or services did not align with the franchisor's brand.
Operating a franchise differs from running your own business, as introducing new products or services at the local level to boost revenue or meet customer needs must first receive approval from the franchisor [Starting your own business vs Buying a Franchise].
What level of autonomy do franchisees have in local marketing efforts and branding strategies?
Subject to compliance with the franchisor's guidelines, franchisees are generally able to conduct their own local marketing campaigns and develop local brand strategies. Some franchise agreements even require the franchisee to undertake ongoing local marketing. Examples of local marketing campaigns include sponsoring or being involved in community events, or sponsoring the local sporting team.
In addition, franchisees may be able to operate local social media pages under the franchisor's brand (in accordance with the social media policy of the franchisor). Local social media pages offer another way for a franchisee to make its products and services more customised and personalised to the local market.
Franchisee Social Media Guidelines: A Comprehensive Overview
Can Franchisees Negotiate with Suppliers Independently, or are they required to use specific suppliers?
A franchise agreement will usually be quite strict in its requirements that the franchisee use specific suppliers for franchisor approved products, and franchisor approval will need to be obtained to use different suppliers.
Controlling suppliers is one way for the franchisor to control the quality of the product and ensure that customers get the same experience at different franchise outlets. Additionally, controlling suppliers instills confidence in the franchisor that products are able to be supplied.
However, there may be instances where franchisees need to negotiate with suppliers independently, either due to issues with franchisor approved suppliers, or if the franchise business is in a new area that is not serviced by franchisor approved suppliers.
Franchisees must ensure that any negotiations with suppliers align with the franchisor's guidelines and approval processes to maintain brand standards and consistency. The franchise agreement will usually contain the procedures to be followed if the franchisee needs to use different suppliers.
Challenges of FranchiseE Autonomy
It is crucial for franchisors to strike a balance between granting autonomy and ensuring consistency in brand image, product quality, and service standards.
Franchisees may desire more autonomy than what is outlined in the franchise agreement, while franchisors may want to maintain strict control to protect the brand's reputation. Recent research indicates that franchisees who desire more autonomy generally perform worse than franchisees who are happy to follow the standard system.
While franchise autonomy offers numerous benefits, including better suiting more entrepreneurial franchisees, it also presents some challenges. One major challenge is maintaining consistency across the franchise system. Franchisees may interpret and implement the brand's standards and guidelines differently, which can lead to variations in the customer experience.
Strategies for Balancing Autonomy and Consistency
To strike a balance between franchise autonomy and consistency, franchisors can implement several strategies. First and foremost, clear and detailed franchise agreements should be established, outlining the rights and responsibilities of both parties. These agreements should clearly define the areas where franchisees have autonomy and where consistency is crucial. By setting clear expectations from the beginning, franchisors can avoid misunderstandings and conflicts in the future.
Comprehensive training programs are also essential to ensure that franchisees understand the brand's standards and guidelines. This training should cover all aspects of the business, including operations, customer service, and marketing. Regular communication and feedback sessions can help address any concerns or areas where consistency may be lacking. Franchisors should also provide ongoing support and resources to assist franchisees in implementing the brand's standards effectively.
Additionally, the use of technology can play a significant role in maintaining consistency while allowing for some degree of autonomy. Franchise management software and systems can provide franchisees with access to standardised marketing materials, operational procedures, and performance metrics. This ensures that franchisees have the necessary tools and information to maintain consistency while still having the flexibility to adapt to their local markets.
The Future of FranchiseE Autonomy
The future of franchise autonomy is likely to be shaped by several factors. One of the key drivers is the increasing demand for personalised and localised experiences. Customers today value authenticity and uniqueness, and franchise autonomy allows businesses to cater to these preferences. As a result, franchisors may continue to grant more autonomy to franchisees to meet the evolving needs of customers.
Another factor influencing the future of franchise autonomy is technological advancements. With the rise of digital platforms and automation, franchisees have access to tools and data that enable them to make informed decisions and streamline their operations. Franchisors can leverage technology to provide franchisees with real-time insights and support, further enhancing their autonomy while maintaining brand consistency.
Key Takeaways
Overall, franchise autonomy will continue to play a role in the success of franchise businesses.
Franchisors that are able to strike a balance between franchise autonomy and brand consistency are likely to have an advantage over systems that either lack consistency or lack any autonomy.
Well designed and drafted franchise agreements will be crucial in maintaining this balance.
