Recently we had a conversation with someone who was very eager to franchise his business and said he wants to be more of a “franchise partner” with people who buy into his concept. This business owner was using the term “franchise partner” loosely. As you will see below his intent was in the right place, however in franchising using the term “franchise partner” or “partnering with someone” to describe the franchise relationship is misleading and inaccurate.
Franchise Partner is Not a Correct Way to Describe a Franchise Relationship
Dave, our President, is the one who had this conversation and asked the business owner (who we will call Fred) what he meant when talking about wanting to be a franchise partner with other people. Dave wanted to understand Fred’s intent because it is possible that what Fred wanted to do might be a different type of relationship than franchising (learn more about what it means to franchise your business). Fred indicated that he wants to help future operators in every way possible with regards to marketing, best practices, tricks of the trade, ongoing training, a constant flow of new materials and to be there when operators are faced with a problem so he can mentor and help find a solution because he has “seen it all” and can quickly provide guidance. Fred continued to explain how he wants to offer these operators a program where essentially he will be their franchise partner (read about our proprietary franchise development services and our strategy when building a franchise program). Dave quickly realized that Fred was innocently characterizing the relationship as a franchise partnership.
Upon hearing all of this, Dave told Fred that he is right in tune with what franchising is about however Fred is using the wrong term when it comes to describing the franchise relationship. Dave went on to explain that Fred’s responsibility as a franchisor is to do all of the things Fred mentioned above, however as a franchisor Fred is not partnering with anyone. The term partner indicates that Fred is equally responsible and assuming the same risks as the operator when it comes to the business. In franchising, that is simply NOT the case. Dave explained that one of the HUGE benefits of franchising is that the operators who buy into Fred’s concept as a franchise are independent business owners operating their own limited liability or corporation responsible for their own business; therefore shielding Fred from any problems (discover some of the other benefits of franchising). So technically speaking Fred is not partnering with these operators. In a franchise relationship, Fred does not own any membership units of their limited liability company, does not own any shares in their corporation and does not play a role in their day-to-day business operations. Using the term “franchise partner” denotes that Fred is doing these things which is misleading. Furthermore, Fred’s role as a franchisor will be to teach his franchisees how to be self-sufficient and not to depend on him when it comes to running their business (read more to understand what’s your role as a franchisor). Dave explained that it all boils down to how well Fred executes everything from training to the materials he provides to franchisees including his ongoing support.
Being Involved Does Not Mean You Have Ownership
On the other hand, if Fred had indicated that his intent was to be involved in the operators’ day-to-day business (such as helping them to answer phones, training their staff, etc.) and work side-by-side with these people then partnering is the correct term. However, working side-by-side with an operator is NOT a franchise relationship but rather a partnership in the traditional sense. In a partnership this means that Fred would be part owner in each of the locations that open (and sharing all the risk). If Fred wants to work side-by-side and wants to actively participate in the daily operations for each location; then franchising does not make sense (see “Is Franchising for Control Freaks”).
The bottom line is that in the franchising industry the term “franchise partner” is a bad word! It all boils down to semantics. Once Dave explained all of this to Fred and what a partnership denotes, Fred fully understood how he was misusing the term. Like most things in language, it is all about the intent and how words are used in context. While Fred’s intent of using the term “franchise partner” was good, it can be construed as misleading and open him up for liability. When building a franchise you really need to work with someone who fully understands semantics and how that plays a huge role in building a strong franchise structure (be careful who you talk to about franchising your business). After reading this brief article, hopefully, your radar is up as to why throwing around the term “franchise partner” is bad when it comes to franchising and enticing people to buy into your concept. Call us directly at 1-877-615-5177 and we will answer any questions you have about franchise relationships and our franchise development program.
- Are Franchisees Considered Employees?
- What to Look for in a Franchise Development Company
- A Custom Approach to Franchising Your Business
- Providing Ongoing Value to Franchisees
- How Franchising Will Affect Your Future
- Scale Your Restaurant With Franchising
