How to Deal with Ineffective Franchisors

I recently got an email from a reader of this blog:

Greetings. I find your articles very helpful especially about having sound inventory. I recently acquired a franchise package. I have read a book and some articles on franchising before getting into our contract with the franchisor. I was hoping that with the readings I had had I would be more prepared to get into the franchising business. Unfortunately, during the first week of our operation, I immediately found out that the franchising system I got has a very inefficient system (from set-up, food delivery, etc.) and I am tied to them for 3 years. I find myself in a difficult scenario now – how would I survive with this kind of system for 3 years?

I know going into the business takes a lot of courage and endurance because of the many risks involved in it. What bothers me is how can a naive franchisee like me be protected from franchising deals. On my part, I signed the contract affirming that I will comply with the franchisor’s system and policies. But what about the part of the franchisor? What would I do when the franchisor fails to deliver what was promised in the contract? Where can I go and ask for intervention when no action has been made coming from our franchisor?

Please advise. Thanks.

– Jean (not her real name)

First of all, I am really sorry this is happening to you. The number one motivation killer for all starting entrepreneurs is disappointment. (Besides that, receiving poor customer service is my pet peeve, so you are guaranteed that I feel for you!)

Well, to act on your problem, you can possibly do two things: to stay or to get out.

Giving it one more shot

Well, to be fair with some companies, some good business systems are sometimes run by bad employees. Believe me, I’ve seen the different kinds of baddies — the lazy, the rude, the inefficient. While you cannot fix these directly as they are not your employees, you can contact the higher management and they will rectify the situation for you. Via phone is good, but it would be better if you can come personally and talk to the managers. Being there in the flesh shows that you mean business.

Also, are you one of the starting franchisees of the franchisor? It is understandable that a business system that is new to franchising to be slightly wobbly. If you are one of the pioneer (or in franchise slang, guinea pig franchisee), you might want to stick a little bit longer to see if the the system improves.

If the situation does not improve and you are still not satisfied with their service, it might be a good time to get out.

Getting out

Please review your contract. Does the three-year contract specifically tell you that you need to meet a regular quota for orders? If it does not, you can safely pull away from the franchise business early. The initial fee will be voided, but what I heard from a Fillipino-Chinese business mogul: “Di bale nang lugi, basta di sobrang lugi.”

You can also seek legal assistance for breach of contract, if the contract says that the franchisor will give you the services that they are not giving you. If the franchisor is proven at fault, you can get awarded with damages.

Protecting Yourself

Next time, before agreeing to a franchise opportunity and entering a contract, do your research. Be vigilant. Ask the franchise consultant or sales staff the following during presentation:

– How many franchisees do you have now? How are you able to supply them?
– How long is the average time before your franchisees get the money that they invested?
– Can I get some addresses of franchisees so I can check how their businesses are faring?

Additionally, do some quality research on the internet, checking the company background, the owners behind it and if there are dissatisfied customers (and if their dissatisfaction is reasonable.)

I hope this helps. Oh, one last tip, please do not feel burnt out from trying other types of businesses. I believe in the law of attraction — if you focus on a certain goal, the universe will conspire to give you what you focus your intentions to. If you intend to succeed in business, you can consider this experience a part of the bigger plan.

Ask the Franchise Coach is where I answer (when time permits) personal emails about franchising and small businesses. Send your questions to: ask[at]foodcartfranchisephilippines[dot]com.