Who really wears the pants in franchising relationships

Both franchisors and franchisees have significant power, but often misunderstand its extent and use according to two leading industry experts.

Griffith University Business School (GBS) Dean of Learning ant Teaching Professor Lorelle Frazer and Franchise Advisory Centre Director Jason Gehrke will discuss power relationships in franchising at a special seminar tonight (Tuesday, June 5).

The seminar, ‘Franchisor versus Franchisee – Who really wears the pants,’ will reveal preliminary research findings into power relationships, and propose a model for movement of power in a franchise system back and forth between franchisor and franchisee.

Funded by the Australian Competition and Consumer Commission (ACCC), the initial research was conducted by Professor Frazer, GBS academic Dr Scott Weaven and GBS PhD candidate Owen Wright.

Professor Frazer said the research explored the issues of power, control and conflict in franchise relationships.

“Early indications show that influencing factors include the success of the franchisee’s business, the stage of the franchise relationship, and the size of the franchisee’s holdings,” Professor Frazer said.

“The perception is that each side thinks the other has power, but the reality is that the franchise agreements which bind the parties together are written in the franchisor’s favour.

“However, underlying the relationship is the drive to align franchisor and franchisee goals for maximum system effectiveness.”

Mr Gehrke said when power was defined as the ability to influence the allocation of resources, franchisees held high levels of power.

“Franchisees hold a high level of power as a result of their ability to influence the allocation of franchisor resources before, during and after the franchise term,” Mr Gehrke said.

“Franchisors expand terrific amounts of time, effort and money in their acquisition of franchisees and this initially gives franchisees a large amount of power – but it is power they are largely unaware of.

“The power balance then swings back toward the franchisor and bounces back and forth depending on circumstances during the franchise term, before the power then swings back in favour of the franchisee at the end of the relationship.”

Mr Gehrke said this was due to the reallocation of resources by the franchisor in replacing the franchisee.

This is demonstrated by Gehrke’s franchise power model, which shows highly established franchisors in mature markets hold a greater balance of power than new systems, where the balance of power could be held by franchisees.

The seminar will be held in the Hyde Park Forum Conference Centre, Level One, 271 Elizabeth St, Sydney from 6pm – 7pm, followed by a networking function until 8pm.

For more information visit our Franchising website.