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Chapter 11 - The Franchising Relationship

This document discusses the franchise relationship model known as the E-Factors model. The model outlines six stages of the franchise relationship: Glee, Fee, Me, Free, See, and We. It also examines causes of conflict such as accounting procedures, discount practices, and advertising fund usage. Finally, it presents the CARE approach for building rapport between franchisors and franchisees through communication, awareness, rapport, and expertise.

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Hoon Yi Yang
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0% found this document useful (0 votes)
149 views20 pages

Chapter 11 - The Franchising Relationship

This document discusses the franchise relationship model known as the E-Factors model. The model outlines six stages of the franchise relationship: Glee, Fee, Me, Free, See, and We. It also examines causes of conflict such as accounting procedures, discount practices, and advertising fund usage. Finally, it presents the CARE approach for building rapport between franchisors and franchisees through communication, awareness, rapport, and expertise.

Uploaded by

Hoon Yi Yang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 20

CHAPTER ELEVEN

THE FRANCHISING
RELATIONSHIP
Methews, J.; DeBolt, D. & Percival, D.
(2011). Street Smart Franchising. 2nd
Ed. Wisconsin: Entrepreneur Press. pg.
157-172

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CHAPTER OBJECTIVES
 to examine the Model of Franchise E-Factors
as a model of franchising relationship.
 to identify the causes of conflict.
 to discuss the consequences of legal action.
 to examine the C.A.R.E approach in franchisor
and franchisee relationship.

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The Model of Franchise E-
Factors
By Greg Nathan

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INTRODUCTION
• The model E-factors is first introduced by Greg
Nathan an internationally renowned franchise
adviser, corporate psychologist, and founder of
The Franchise Relationships Institute.
• Each stage is marked by the franchisee's and
franchisor's distinct beliefs, emotions, actions,
and levels of dependence and satisfaction of the
relationship at that time.
• The six stages are GLEE, FEE, ME, FREE, SEE and
WE
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The Glee Stage
• The moment a potential franchisee makes the
decision to joint a particular franchise.
• At this stage, the relationship is totally
dependency on the knowledge and experience of
the franchisor.
• In the absence of any training and support by the
franchisor, many franchisees will ultimately fail.
• franchisees are vulnerable in the Glee stage.
• But, franchisee believe their franchisor will
successfully impart the necessary KASH
(knowledge, attitudes, skills, habits) that will
eventually liberate them.
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The Fee Stage
• Franchisees in the fee stage can become more
demanding about the service they receive for their
franchise fees.
• They raise their expectations of the franchisor, wanting
such things as more services, higher quality, greater
responsiveness, and more training for their staff.
• The franchisee become more sensitive to where their
money is going.
• The honeymoon period of the franchisee-franchisor
relationship is also over, replaced by the "What have
you done for me lately?"
• this stage is also marked by a dependency on the
franchisor.
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The Me Stage
• Franchisees move into the Me stage when the franchisor is
not going to make them successful.
• Their success will be completely dependent on their ability
to create results using the franchisor's business systems.
• Franchisees in the Me stage start winning and experience a
renewed sense of empowerment.
• Some will become somewhat egotistical, dismissing the
franchisor's and other franchisees' contributions to their
success.
• "I know more than you do" attitude franchisee into the
relationship.
• The Me stage is marked by franchisees asserting
independence, a clear departure from their previous
dependent relationship with the franchisor.
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The Free Stage
• The relationship between the franchisee and franchisor at
this stage shifted from dependence to independence.
• Some franchisees get stuck in this stage, and their
relationship with the franchisor remains strained. Those
who get stuck usually see one of three outcomes.
 
– They get frustrated with the franchisor and sell
"Freeeedom!"
– They frustrate the franchisor, and the franchisor either
forces a sale or terminates the franchisee's agreement for
material breaches in their franchise agreement (if such
breaches exist) or forces the franchisee into compliance.
Or
– They learn to live together and stay out of each other's
way.
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The See Stage
• The relationship is no longer about one party
winning and the other losing.
• Both parties need to win! This invites mature,
intelligent, commercially minded strategizing and
problem solving, not petty, immature fighting,
bickering, and gossiping.
• The relationship immediately begins to mature
from an independent relationship to an
interdependent relationship, which is all the
franchisee and the franchisor wanted in the first
place.

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The We Stage
• This stage is characterized by mature, objective, global,
problem-solving, strategic, interdependent thinking.
• The franchisor is no longer the enemy.
• The battle is for market share, not about who is right
or wrong.
• Both the franchisor and franchisees must understand
and respect each other's style and decision-making
processes.
• Franchisees and the franchisor must each be fully
committed to the other's success.
• The franchisor must think, "When a franchisee fails, I
fail." Conversely, franchisees must come from, "If my
franchisor isn't winning, I am not winning."
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Causes of Conflict

Webster, B. (1986). The Insider’s Guide


to Franchising. Amacom – American
Management Association. pg. 185-190.

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Accounting procedures and
requirements.
• Some fail to file accounting and management
reports when required.
• Sometimes, too, franchisees file false reports
and are caught when the companies audit
their book..

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Discount and coupon practices.
• extensive coupons, discounts, and special
deals can ruin your profit margins while
boosting the franchisor's image and royalty
income at your expense.
• You should have negotiated a contract clause
allowing you to choose whether to offer
discounts and coupons.

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Diversion of advertising funds
• Many franchises set up advertising fund in which
any specific advertising fees or royalties are
pooled.
• Many, however, do not have such a pool, and put
ad fees into their general operating budgets.
• It is tempting for franchise companies to use
these ad dollars to boost their profit margins, or
subsidize activities that promote per projects of
the franchise founder.
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OTHER CAUSES OF CONFLICT
• Running company-owned stores in competition with
franchisee-owned stores.
• Pricing and leasing equipment.
• Lack of support.
• Lack of financial support.
• Payment schedules for royalties, advertising fees,
rental payments, and equipment leases.
• Failure of the franchisor.
• The quality control issue
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Franchise Relationships - Legal
and Consequences
• Before issuing litigation, think the cost of litigation.
• Has strong issue before litigation is taken.
• Mediation is the most effective method for
franchisors to settle issues with franchisees. It is a
quick and relatively inexpensive way to resolve
issues.
• Timely and direct negotiation between franchisor
and franchisee is a skill set possessed by smart
franchisors.
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C.A.R.E Approach
• Communication - Most franchising
organizations create newsletters to help
enhance communication throughout the
system.
• Awareness - The franchisor should make its
franchisees aware that they are appreciated
and are a vital component in the success of
the organization.

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C.A.R.E Approach
• Rapport - The franchisor should try to develop a
strong personal rapport with each franchisee.
Some franchisors do this by providing birthday
gifts, flowers on special days, and remembrances
for services performed goals reached.
• Expertise – provide expertise concentrate
specific areas such as finance, management,
personal growth, marketing, and even special
promotions.

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Recap……………….
• The six stages of Franchise E-Factors are GLEE,
FEE, ME, FREE, SEE and WE
• There are many causes of conflict in
franchising.
• C.A.R.E. is a approach to develop good
relationship between franchisor and
franchisee.

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