A special relationship: New Zealand, Australia franchisors considered mature in operating systems and fostering franchise relations.

The relationship between a franchisor and a franchisee is special and you could even say it is unique. It is based upon mutual trust and respect and I liken it to a marriage. Franchisors when they start out with their first four or five franchisees are learning and it can be a very steep learning curve with many mistakes being made. The skill of the franchisor in dealing with franchisees throughout the relationship will be a fundamental factor in determining the degree of success, which they will both enjoy.

New Zealand and Australia 

Many franchisors in both New Zealand and Australia are considered to be mature both in their franchise system and in relation to the innovative programs installed to foster franchise relations. For example, in New Zealand there is Stirling Sports, the $2 Shop and Greenacres. In Australia there is Aussie Pooch Mobile, Autobarn and Michel's Patisserie. Franchise systems which operate in both New Zealand and Australia include Pizza Haven, Bakers Delight, Fastway Couriers and Wendy's Super Sundaes, to name but a few. In all of these cases, the franchisors operate and maintain positive programs to foster and enhance franchise relations. Examples of some of these programs include the following:

* Keeping franchisees informed and up-to-date.

* Telling franchisees the good news that occurs in the business each week.

* Sharing the bad news with franchisees who need to know.

* Keeping franchisees fully informed of future changes likely to affect them.

* Involving franchisees in discussion and decision making directly rather than just paying lip service to it.

* Making each franchisee and each employee of a franchisee personally responsible for quality work.

* Displaying management skills by predictability and order in management style and daily behaviour.

* Openly displaying the franchise mission statement, the goals and strategies.

It is important not to treat franchisees badly by berating them publicly or by demeaning or ignoring their efforts. It is far better to use positive ways to earn their commitment. Most people like to show how good they are and they enjoy being stretched, challenged, recognised and rewarded. Recognition is a most potent reward and hearing one's own name spoken in praise is very satisfying.

The franchisor, the franchisee and managers and employees of the franchisee must display leadership and managerial competence. It has been proven that motivation enables people to direct their efforts at a chosen goal. It is important for franchisors to foster positive franchise relations with their franchisees to get the best out of all franchisees.

Franchise Development Councils

Many franchisors, when they have 20 or 30 franchisees, will set up franchise development councils. Such councils contain representatives of the franchisees (not too many in number) who meet with the franchisor on a regular basis perhaps monthly or bi-monthly. The purpose behind the councils is for the franchisor to hear what franchisees are saying on operational and practical issues. Many good ideas have come out of the mouths of franchisees and it would be a foolish and arrogant franchisor who would not at least listen and consider points made by franchisees. After all, the franchisor and all franchisees are part of the same franchise system and all working for the common goal of promoting and developing the system and the brand so that everyone can prosper and be satisfied.

Franchisors and franchise managers must display the human attributes of patience, being a good listener, being receptive to ideas, being compassionate where necessary, being assertive where necessary and above all talking to franchisees at the same level. Franchisees will respond and a wonderful way of enhancing the relationship is to have an annual conference, which should be a fun event as well as an educational event. I have attended some conferences of franchisors in New Zealand and they have been positive and exceptional. I am also aware of some conferences where the franchisor has allowed franchisees to attack the franchisor on specific matters in front of all franchisees, which is not the purpose of the annual conference.

In both New Zealand and Australia, the level of franchise disputes is very low when you consider the number of franchise systems operating. In New Zealand, the 2001 Survey conducted by the Franchise Association of New Zealand (there was no survey in 2002 and the 2003 Survey is about to be published) showed that the failure rate for franchise units was less than 6 percent over a three-year period and that the total number of systems operating in New Zealand was 300. The last full survey in Australia in 1999 showed that there were more than 700 franchisors operating with about 1 percent of all franchisees having been involved in a substantial dispute with the franchisor. What this says to me is that franchising in both countries is sophisticated and is being conducted in a way to foster positive franchise relations. At the essence of the relationship is mutual trust and respect and it is essential to ensure that there is good communication between the franchisor and all franchisees. Such communication can be achieved in a number of ways including:

* Franchise newsletters usually now by e-mail.

* Field support staff who visit franchisees at regular intervals and who are available for guidance by telephone.

* Head office staff who are available to help within the scope of their particular portfolio, for example personnel, product, accounting, equipment.

* Franchise conferences.

* The encouragement of information flow from franchisees to franchisor.

I am impressed by the standard of programs conducted by franchisors in both New Zealand and Australia to foster good relations with franchisees. Such programs must be continually developed and updated in order to obtain the best from franchisees. In my experience, the number one problem or criticism of franchisors is the lack of good communication to franchisees, so sound programs will easily avoid this problem.

Stewart Germann is the Principal of Stewart Germann Law Office, attorneys at Auckland, New Zealand. He is a board member of the Supplier Forum and can be reached at 64-9-3089925 or [e-mail].