Sometimes when a franchisee is unhappy they’ll generate bad publicity for the franchisor to get revenge, however this can lead to devaluing the franchise and adversely affecting the other franchisees in the system.
So what happens if you’re one of the other franchisees in the system?
Depending how unhappy the franchisee is, and how much noise they make, the bad publicity may pass quickly and only have a minor impact on the franchise brand.
However, if the bad publicity continues you may want to discuss positive publicity opportunities with other franchisees in the system, or request as a group for the unhappy franchisee to find an alternative way of expressing their frustration with the franchisor.
Even if your franchise unit is highly profitable and it comes time to sell, you may find it challenging to sell your franchise if there has been extended bad publicity surrounding the franchise brand.
Also if there are a number of unhappy franchisees in the system, when prospective buyers speak with other franchisees as part of their due diligence of buying a franchise, they may be scared off.
If this is the case, unfortunately there is little you can do.
Risks of franchising
As a franchisee you’re bound by the rules and restrictions of the franchise. You buy into the brand, and the strength of the brand can change over time – that’s just one of the risks of business.
One risk of franchising, which I’ve seen in recent years, is that sometimes franchises don’t evolve as quickly as the market trends, so again your investment could be diminished despite all your hard work.
Another risk is the franchisor may change. For example a venture capitalist may purchase the franchise or an existing franchisor may be looking to buy brands in similar industries.
While a change in franchisor may be positive, this may not always be the case and is something franchisees need to consider prior to buying a franchise, particularly as more acquisitions are predicted across the sector in coming years. Is that a risk you’re willing to take?
Tips to help minimise franchising risks
- Be as involved in the franchise as possible – there are often opportunities to participate in a franchisee advisory group, which may allow you to have some input into the direction and/or marketing of the franchise.
- Follow the system and engage with head office – you’ll have more chance of your suggestions being heard if you’re a good ‘franchise citizen’.
- Track and measure your business performance to ensure you’re running as effectively and efficiently as possible, and to identify early warning signs the market may be beginning to change.
- Be a good corporate citizen – engage with your local community and always speak positively of your business as you may find a suitable buyer through your network.
- Operate your business ready to sell – that way when you do need or decide to sell, you’ll be well-prepared and your business will be operating at maximum profitability.
- Buying into a franchise can accelerate business success due to proven systems and a recognised brand, however being in business (any business) still has its risks, so you need to assess all opportunities, weigh up the pros and cons of each, and seek professional advice before making a decision to invest.
Be aware, that while franchising can mitigate some risks in business there are still significant risks in franchising.