Franchising is a unique business model. As the franchisor, you are relying on strangers with money to carry out your vision. As a franchisee, you are doing all of the work to get a startup to success based on someone else’s vision and goals. Negotiations and difficult conversations between franchisor and franchisee are inevitable and different from traditional business negotiations. I had the former vice president of 1-800-GOT-JUNK, Evan Hopkins, on the podcast to discuss franchising negotiations.
Using the correct terminology and understanding what makes investors wince in initial introductions and discussions will be crucial to long-term success. Nothing in franchising is more important than knowing how to build relationships and tackle problems with your franchisee, or partner. They are administering a significant financial contribution and may not want to be referred to as franchisee. Acknowledgment and true appreciation of their personal and financial sacrifice is the foundation of your relationship and business endeavour. Leaving them embarrassed or under-appreciated may threaten future results.
Before ever discussing results, a deeper understanding of both franchisor and franchisee is required. Getting into the field with your franchisee is necessary, just as “secret shopping” as a franchisee will show you how the business operates. Don’t make assumptions about a region you don’t understand, and don’t invest in something you don’t comprehend fully. Due diligence is needed on both sides of franchising. Before getting involved, Evan exhausts every possibility of interaction offered with a franchise. Finding weak spots creates leverage in negotiations and identifies areas corporate are likely to assist.
A good franchisee will leave the franchisor motivated, excited, and energetic. As they learn they will provoke excitement and renewed passion in franchisors. That will be indicative of future success, but it is important to consider how far into the future initial motivation will carry the business. Twenty years down the road, ambition and business landscape will be different. Franchisees have to continue to improve personal skillsets to accommodate changes with the business, and franchisors have to understand the positions franchisees are in, personally. It is not advisable to pursue challenging discussions without first understanding these factors. A general rule for negotiations is you must spend five times the amount of time spent at the negotiating table researching your counterpart. A solid understanding of regional economics and business practices is needed before tackling lacklustre numbers.
As a franchisee, researching how corporate can assist your business is pivotal to discussions. Referencing innovation and growth in your requests for extras illustrates you only want to increase everybody’s bottom line. Understanding there are more factors to your business than franchise fees ensures you’re not leaving value on the table.
On both sides of a franchise negotiation, be present, customize your approach, and never be afraid to ask for leads and referrals.
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