Business Analytics in Franchising

Business Challenges: Managing The Franchisor And Franchisee Relationship

Franchising is “a business opportunity by which the owner … grants exclusive rights to an individual for the local distribution ... The individual or business granting the business rights is called the franchisor, and the individual or business granted the right to operate … is called the franchisee.” (Justis & Judd, 2002, pp. 1-3) Developing a good “family” relationship between the franchisor and the franchisee is the key business challenge of a successful franchise (Justis & Judd, 2002). Figure 1 describes how such a “family” relationship is built in the franchise business community. In the figure, the franchisor’s learning process is incrementally developed through five stages (Justis & Judd, 2002): Beginner – learning how to do it; Novice – practicing doing it; Advanced – doing it; Master – teaching others to do it; and Professional – becoming the best that you can be. Once attaining the advanced stages of development, most preceding struggles have been overcome. However, further convoluted and challenging enquiries will arise as the franchise continues expansion. This is especially true once the system reaches the “Professional” stage, where various unpredicted and intricate problems could arise. To capture the learning process, a counter-clockwise round arrow surrounding the franchisor is used to depict the increasing intensity of learning as the franchisor continues to grow.

Figure 1.

Understanding how the franchisor/franchisee “family” relationship works