Partners Are Different from Contracts and Skin in the Game Matters

By Christian Collucci - EVP Franchise Development

In franchising the word partner is a common term that is often thrown around and it has become pretty cliche.  Many franchisors refer to their franchisees as partners but are they really?  At the end of the day, franchisees are really just contracts that each party agrees to. 

If you have ever read a franchise agreement they are all one-sided, because by the very nature of the franchise agreement is about creating brand value for the franchisees and the system.  There are rules that govern how the brand is used, and who does what. They can very wildly from system to system, and some can be very restricting, but that is not partnership even though every franchisor talks like it is.

Often what happens in franchise systems is the Franchisor and the Franchisees can have different needs, or differ on where the business strategically needs to go, and what  direction the brand should take.  These differing interests can lead to NIMBY-ism (not in my back yard) and make it difficult to implement programs across the system and thereby build brand value.  This can be mitigated by the use of advisory councils made up of franchisees that represent the franchisees interests to management.  But at the end of the day, in most franchise systems the cold hard facts are that franchise agreements are simply contracts...if they move the needle and help the franchisee create wealth that's great.  If they don't oh well, let's enjoy the royalty stream.

We are the first franchisee/franchisor owned system to make our franchisees actual owners in the franchise system.  Our franchisees are awarded common shares of the parent franchisor, so they now have some skin in the game to see everyone grow, and look at the business on a more macro level.  This is truly a fantastic program that we know will help us leverage the strength and diversity of our current and future ownership group as we continue to build out a world class franchise system.

Franchises like all businesses are built by people, and by giving everyone some skin in the game and a piece of the action as we grow.  The system doesn't grow if there is not good validation and solid business fundamentals in place. This program aligns the franchisees and the franchisor together through common goals to see the system grow and to have balanced growth for the entire business.

We are excited by where this will take our business, since we launched this initiative late 2015.  It makes us all accountable to each other to build and strengthen the brand.  It's still early but we can clearly see the difference that having some skin in the game is making across the system!

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