Franchisor/Franchisee conflict due to poor communication: Study
A study by Griffith University into franchise conflict has revealed the need for better communication between franchisors and their franchisees.
The study, which was funded by the Australian Competition and Consumer Commission and the Australian Research Council, examined the relationship between franchisees and franchisors and the causes of conflict between the two groups. 350 franchisees from Australia responded.
ACCC deputy chairman Michael Schaper said the study results show that open, honest communication – and an honest assessment of the franchise system – was critical to the success of any franchise.
“Thirty one per cent of the franchisees indicated that communication within their franchising relationship was unsatisfactory. Disturbingly, the study also found that 49 per cent of franchisees relied heavily on their gut feeling when deciding to go into franchising.”
“Despite an obligation under the Franchising Code for franchisors to provide accurate disclosure documents to potential franchisees, 41 per cent of franchisees surveyed said they faced surprises after buying their franchise.”
“The ACCC has and will continue to take action, where a franchisor blatantly disregards a franchisee’s right to accurate disclosure,” Dr Schaper said.
The study also indicated that many franchisees were failing to make use of available mediation services to resolve the problems that they had with their franchisor. The Franchising Code of Conduct makes explicit provision for access to cost-effective dispute resolution and mediation procedures, yet only two per cent of franchisees surveyed used mediation to resolve conflict with their franchisor.”
“The ACCC will look to address some of the issues raised in this study through further education of the franchising sector, with a particular focus on prospective franchisees,” Dr Schaper said.
The ACCC also signalled that it would continue to encourage franchisors to deal with conflict internally. “Ideally, all franchise system should develop effective in-house compliance systems to prevent conflict escalating to the point where a complaint is lodged with the ACCC.” Dr Schaper said.
Click here, tor a full copy of the study results. For more information about the Franchising Code of Conduct, visit the ACCC’s franchising webpage.
Businesses in general benefit from training in communication and negotiation skills. One major US company did just that for almost 40,000 employees over two years, The skills training reached every level of the company and had built-in refreshers. This effort was focused on workplace conflict.. Conflict management in franchised companies is essential to the smooth operation of the system. Starting with the organzied franchisee associations or counsuls, it is simpler and faster to add a 1/2 or full day to an already scheduled conference. Using the skills learned in the training, the participants begin the necessary early conversation with more confidence, as it is clear that the system as a whole recognizes and has invested in better communication before anyone escalates an issue. If those conversations are no longer productive, the parties should know the next step. The next step is also the least litgious, mediation. Mediation is a continuation of the business negotiation conversation, now assisted by a neutral third party and heavily focused on candid connumication. If the mediation is not successful, no one has given up any rights and can proceed in a variety of venues to achieve settlement.
Franchised business in particular benefits from clear communication, as the study shows.
How unsurprising! As someone who’s been involved with franchising since it began in Australasia, and has witnessed poor communications as indemic, this was a big yawn. Franchisors will never learn!