Responsible Franchising

Responsible Franchising is an International Franchise Association (IFA) concept to promote good franchising practices. I first heard it at an IFA Convention and World Franchise Council meeting in 2023.  

The practices, directed at established franchised networks, include:

1. Setting clear goals and expectations during pre-sale period so franchisors and franchisees are aligned in the long-term.
2. Connecting prospective franchisees with the right opportunity through due diligence and validation of all parties in a franchise sales process.
3. Ensuring franchisors and franchisees commit to their respective operational obligations to protect the brand and a franchisee’s equity.
4. Focusing collectively on driving unit economics and profitability for all.
5. Embracing collaboration among the franchisor and franchisees through open communications with franchise advisory councils and independent franchisee associations when modifying standards to respond to changing market forces and consumer preferences. 

Adopting these practices will foster better long-term outcomes. 

Preparations for Responsible Franchising

Responsible Franchising should start when companies franchise a business, by franchising responsibly. The first critical step is a comprehensive franchising feasibility study assessing the business, defining the franchising structure, and evaluating it financially from a franchisee and franchisor perspective.

Further investment in planning, systems, manuals and executive training lays further foundations for ongoing responsible franchising practices.

How franchising responsibly helps

A strong franchising feasibility study, implementation plan, legal and franchise manual development enables communication of a clear business model, investment and franchise support expectations to potential franchisees. This helps ensure clear franchisee-franchisor alignment pre-sale and clarifies attributes needed by future franchisees, providing better targeting and validation for appropriately matched franchisees.

Initial franchise system development will create clarity on what franchisees and franchisor need to do. Ensuring this is codified in agreements, manuals and management practices will strongly support operational obligations to protect the brand, franchisee and franchisor equity.

Strong franchise system development includes great focus on unit-level economics, and franchisor economics – including how to work with franchisees to plan and support their profit and investment returns. This is an important, nuanced area requiring great franchisor knowledge and leadership.

Strong system development sets a base for effective communication, collaboration and change management – a crucial yet typically challenging area for franchise systems.

Final thoughts

Franchising companies are better prepared to run a franchise system by franchising their business responsibly at the outset, creating a base for Responsible Franchising practices.

Multi award-winning Franchize Consultants has provided small, medium and multi-national sized businesses with franchising structure, strategy and improvement advice for over 35 years.

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