Let me paint a picture for you. You’ve been thinking about owning a business for quite some time. You’ve engaged with a franchisor, maybe even Right at Home, and you’ve gotten really excited about the business after talking with representatives at the corporate office, as well as the franchisees. You’re thinking you might actually take the leap. Then, as things get serious, you decide to give the franchise agreement a closer read. You start thinking to yourself that the agreement is mostly what you expected, but there are some things that need to be altered for your specific circumstances. Should be no problem, right? After all, you’ve had great conversations with the folks at the corporate office and both parties are excited. Now all you want to do is make a few minor tweaks to get you comfortable with the agreement.
For many franchisors, negotiating changes to the agreement will be quite a big deal and most, especially those who have a longer track record in franchising (or those who have executives with a long track record in franchising) simply won’t do it. As Right at Home and other successful franchisors have learned (most of us have learned it the hard way), consistency is a critical component in franchise agreements.
There are a multitude of reasons why franchisors are unwilling to make individual changes to franchise agreements. I’ll discuss the biggest ones below from the franchisor’s perspective. For the franchisee side of the transaction, they should find peace of mind in knowing that no one else got a better deal and that every franchisee entering the system is treated equally.
1. The agreement is one-sided – and it’s typically not in the franchisee’s favor
If you have read any franchise agreement before, you are probably nodding affirmatively after reading the headline for this section. Despite how it might sound, this isn’t a bad thing. Franchisors that refuse to budge when it comes to their company’s franchise agreements have a clear idea and direction for their business and their brand. A strong agreement means a strong franchisor, which is something every prospective franchisee should hope for and seek out. The proven, consistent system is one of the cornerstone reasons for choosing a franchise in the first place. If you are not signing on with a strong franchisor that has 100 percent confidence in their business model, then why bother with the franchise fees and royalties?
2. Consistency aids decision making
The franchise agreement’s purpose and success lies in its uniformity. While a franchisee signing an agreement is very focused on the parameters of their specific agreement, the franchisor has to consider managing a business with hundreds or even thousands of these documents in use. If each document is individually negotiated with varying terms and expectations, the franchisor could be rendered powerless to implement the necessary changes to the business model to allow the brand to remain relevant in a changing business environment.
3. There has to be a leader in the franchise system
This goes hand-in-hand with the importance of fact number two (see above). People join a franchise system for the support a proven model offers. One huge benefit of joining a franchise is that there is someone leading the organization and making the strategic decisions (a “mother ship”, if you will). Franchisees pay royalties for a number of reasons, one of which is to ensure their leaders are investing in the best strategic initiatives to put the entire franchise system in the best possible position amongst the competition. While franchisees are absolutely independent – spending their own money, making their own decisions and enjoying autonomy – embracing the standards outlined by the franchise system is a foundational principle of what makes the franchise model successful.
4. The franchisor’s authority to act protects the brand – and your business
If you’re a franchisee in X town, and your neighboring franchisee over in Y city does something that severely tarnishes the brand’s image, your business could be negatively impacted due to proximity. In this case, the franchisor has to have enough authority to act quickly, and if necessary, terminate the franchise agreement of the franchisee tarnishing the brand and hurting your business. We spend a lot of time setting the expectations of our prospective franchisees and making sure they fully understand the business model before they are offered a franchise. As a result, terminating franchise agreements for us is thankfully not a common occurrence. But it is important to know your franchisor possesses this ability, as outlined in your franchise agreement.
5. Current franchisees are the best barometers
Every year, several existing Right at Home franchisees decide to expand their businesses and purchase additional franchises. It’s important to note that they sign the very same agreement that new franchisees are signing. These franchisees are people that have been with us for a period of years in most cases. They’ve seen the model, the support, the training, the performance – everything. They’ve also been paying us royalties for a period of time, and we’ve certainly developed a close relationship with them. So far this year, we’ve had over a dozen existing owners expand and sign additional franchise agreements. If we were going to make anyone a “better” deal, it would be them.
If you’re going through the steps to open your own business through a franchise system, whether it’s with Right at Home or elsewhere, remember that the franchise agreement is in place to ensure that you, your fellow franchisees, and your franchisor have very clear expectations regarding the business relationship. Ultimately, the agreement protects you from other owners who operate their businesses in ways that damages the brand, and it guarantees that the franchisor can make decisions that meet the best interests of the entire franchise system.