Franchise Systems Out of Control

Trademarks are the bedrock of a franchise system. They build consumer loyalty, and are the guiding light for the franchise system. A trademark provides a symbol of expectation for the consuming public, building the brand and consumer confidence.

Trademarks embody the goodwill of a company, this goodwill embodies the positive association consumers make with the brand and their products or services, It is the franchisor and franchisees responsibility to protect and foster that goodwill, to insure the Mark continues to shine bright and portray the image and expectation of their franchise system.

If a franchisee fails to live up to the standards set forth for their system, the franchisor has many avenues to insure compliance, almost all of which are based in the franchise agreement and operations manuals.

But what if a franchisor doesn't protect the goodwill of the brand, the customer experience or expectation. Let's say the franchisor has lost control of their system, leading to a customer experience that erodes or destroys expectation. Make no mistake, it is the franchisors responsibility to enforce the franchise agreement, and the defined operations that make up your system, but at the same time it is the franchisees that must follow that path.

Franchisees do not like to hear about franchisors responsibilities to enforce the franchise agreement, because it means a loss of independence. Without a uniform system, customers begin to fade, their anticipated experience is inconsistent and unreliable, causing loyalty to disappear.

Franchisees have to remember they are not entrepreneurs, not in the traditional sense. They bought into a developed system, where deviation should be frowned upon. Deviation breaks down the fiber and essence of what a franchise system is; uniform. If deviation in a real sense is allowed, to the point where each location is operated differently then the next, or has a different trade dress, or product mix, the loyalty of their customers will never materialize, or in a mature system, may disappear, replaced by a competitor that is more then happy to deliver on their promises.

Legally it is a struggle to get franchisors to clean up their act, litigation can ensue, both on the failure of the enforcement of the franchise agreement and the failure to protect the trademarks goodwill, but that is a long and in many cases fruitless venture. In my experience, the best way to address these shortcomings is through structured negotiations or mediation.

As I discussed in an earlier post, nothing spurs the formation of franchisee associations more, then strife in a system. If the association has a clear purpose, support from the franchisees should be strong, adding to the legitimacy of the association and its goals. I have seen, during times of conflict and change, many associations formed, in a single system, to address the needs of dealers that have band together. Associations can institute litigation, mediation and straightforward negotiation with the franchisor, to right the ship and get everyone on the same page. It is important to take some time for introspection before embarking on this journey, rarely is a problem one sided, and if franchisees have gotten used to creating their own system, it may be a difficult venture to reign them back into the fold.

There are many ways to address systemic problems, both individually and through associations, this article is not meant to be exhaustive by any means. Seeking professional guidance to identify the issues, and create a plan of redress is imperative.

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