The franchise employs more than 300,000 people in France, nearly 8 million in the United States. It is one of the major forms of activity in sectors such as hotels, fast food, personal service, or even commerce. Appears in the United States at the end of the 19the century, it took its modern form in France in 1923 with the creation of the Pingouin stores, launched by Jean Prouvost, owner of Lainière de Roubaix.
Economists have carefully studied this phenomenon by using their theories and models (transaction costs, agency theory, incomplete contracts). However, as stated by Rajiv P. Dant, a leading specialist on the subject, a description of the phenomenological type of this relationship in its complexity is still lacking, that is, a “descriptive analysis of experiences in general “to use the construction. definition by the philosopher Edmund Husserl.
To do this, our work starts from the simplest analysis of the relationship, to make it more complex step by step. Then, as this relationship develops over time, they recognize dynamic scenarios. The research was based on ten interviews, lasting one and a half to two hours, with franchisors and franchisees in four different sectors (hotel, real estate, retail, hairdressing) and with the franchise. specialists.
Imbalance and emotion
Franchising, in its basic definition, is a win-win economic relationship between a franchisor-entrepreneur and a (usually) ex-executive franchisee. The entrepreneur, who invents a concept, wants to develop it quickly and often has limited capital. The manager, who, about forty-five, has accumulated capital and wants to leave the hierarchical world of the company, is at risk by becoming his own employer (many of the newly created companies go bankrupt).
The franchisor will then provide the franchisee with a concept that has proven its value, advertise it, train it, provide it with services that will help it manage its business, give it access to the network of suppliers of it. The franchisee will bring in his capital and his energy. Being directly interested in the success of a business in which he remains the owner, he will undoubtedly be more active than a simple employee. He will also pay a royalty, which is usually equal to a percentage of his turnover.
In the acquisition of the actors in the franchise itself, however, the relationship is actually more complicated. The contract often remains unbalanced. It is tied between a large society, sometimes multinational, and an individual who endangers everything he has. A franchisor puts it this way:
“If the franchisee destroys his g… he will lose everything. With inclusion, usually, a divorce is the key. For my part, if a franchisee can ruin his g… not very seriously. Contrary to popular belief, these are not the same relationship. »
In addition, this relationship often has an emotional dimension. Franchisees often present their entry into a franchise network using a specific metaphor:
“A relationship between two independent entrepreneurs as a romantic relationship.»
The creator of some networks is a central number. The franchisees of “Monsieur Dessange” refer to it with emotion, for example. When he disappeared, some asked themselves the question of leaving the network: will we continue to respect what he is, or leave a group he no longer commands? Obviously the emotional doesn’t dominate the economy, but it does play an important role.
Network and rivals
This franchise relationship is further complicated by the fact that it is a multi-level relationship because franchisor teams are also involved. And things can be very different to one or the other. One franchisor describes a moment of change in group strategy.
“Loyalty is linked to loyalty to teams, franchisees have confidence. Even when there are things they don’t like very much, they stay loyal. When strategy decides outside of them and us, they start to leave. . »
The link between “them” (the franchisees) and “us” (the franchisor’s services that contact the franchisees) is broken here due to the loss of links between the franchisor’s teams and their management.
It should also be understood that the relationship is not double, as at first glance. It is a network relationship consisting of three parties: the franchisor, the franchisee and all other franchisees. Animating and managing its network is one of the first important functions according to one specialist:
“You have to nurture entrepreneurs who want to grow in the spirit of co-construction. We’ve heard a lot of stories about” collective intelligence “in networks. They don’t work for the network because the network is themselves. It is a virtuous circle. »
Ultimately, the franchise relationship is an agonistic relationship that produces conflicts and competition. Of all business disputes in the United States, 30% are franchise -related. Most are settled through mediation or arbitration.
From renegotiation to network breakdown
This weakness in the relationship and in its management can only be understood from a dynamic perspective. Our work recognizes many scenarios. The black scenario is the bankruptcy of the franchisee. It exists, but it happens less often than the bankruptcy of a new entrepreneur: the franchise translates there to its role of protection. Five typical values as they actually appear:
Scenario 1 is based on building relationship balance. The franchisee manages himself, the franchisor weakens his control to give him autonomy.
If the franchisee succeeds, he may feel that he no longer needs the franchisor and will find out that the fee he pays him is too high if he no longer uses his services. Then he wants to renegotiate. This is the second scenario, the of renegotiation. One franchisor described it well:
“We’re always in the razor, it’s a balance of power, it’s not just a loving relationship. If the franchisor is in a strong position, that’s fine; if the franchisor can’t afford to lose franchisees, they have to try very hard. »
There is a structural weakening in the relationship. If the discussions do not succeed, scenario 3 is possible network exit. The franchisee will terminate the franchise or replace the franchisor by negotiating on more favorable conditions.
There are also cases of switch to multi-franchise. The franchisee, for example, is successful in clothing and also takes over a restaurant franchise. Other groups also offer their franchisors many possible concepts. In catering, the Bertrand chain offers Hippopotamus meat restaurants, Léon de Bruxelles mussels and fries, Au Bureau brasseries and Volfoni, which specializes in Italian cuisine. Multi-franchising is one of the ways to strengthen the relationship between franchisor and franchisee with a common vision of growth.
There remains, however, one final scenario, the of the destruction of the network. Negotiation attempts fail, franchisees may leave the network individually, with a cumulative effect. They may also decide to merge and it happens, a case mentioned in an interview, that the franchisees buy the franchisor.
The work of defining the franchise relationship in dimension and dynamic complexity thus makes it possible to better understand the management problems encountered by the actors who embarked on this activity. We also touched on the art of management that they need to develop in order for it to work.
The original version of this article was published by The Conversation, a nonprofit news site dedicated to sharing ideas between academic experts and the public.