The success of a franchise system is closely linked to the success of its franchisees. Making changes without a change management plan can result in unintended consequences that can hurt franchisees and your franchise system.
Poor change management practices can erode trust and damage relationships between franchisors and franchisees and can result in costly disputes within a franchise network.
The most successful franchise relationships have clear processes for how change is managed within their franchise system. They have policies on how change is communicated and consulted on, and how change is effectively rolled out in a franchise network.
Good practice for change management can include:
- regular information sessions with franchisees and open communication channels
- consultation around the risks and nature of any change
- support and encouragement to plan ahead
- providing a reasonable period of notice to implement modifications.
Managing expectations up front is important. Providing clear policies for change can help prospective franchisees understand what may happen during the term of the franchise agreement. A prospective franchisee’s willingness to engage positively in conversations about change should be a consideration in franchisee recruitment.
Franchisee-initiated change is also important. Capitalising on ideas for operational efficiencies can increase profit and revenue opportunities. The franchisor who acknowledges they are not an expert in everything can be empowered by feedback.
People who have been involved with formal dispute resolution after a change note it is usually due to communication breakdown, franchisees were not told prior, or not told enough, about what the change meant or was intended to achieve. There is usually an emphasis on the benefits when communicating a change, but to be reasonable and fair, there should be transparency on costs and risks and who bears them.
It is critical to consider the impact of change on all parties, and this is part of the obligation to act in good faith. Consultation is highly desirable. Sometimes it is possible to fully consult with franchisees concerning the nature of a proposed change, but in other cases confidentiality or market competition prevents this from occurring until after a decision has been made.
Franchisors must act in good faith and should be aware of laws around misleading or deceptive conduct and unconscionable conduct. Change management is not only one of the most challenging business issues for franchise systems but is also a high-risk area in terms of legal claims. If you are not sure, it pays to get professional advice.