Franchisee rights

Franchises can be a dependable port of call in a crowded marketplace - but many Australians have paid dearly for signing on the franchisee dotted line.
 
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03.Quality control

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Judging by the high volume of input we’ve received from ex-franchisees across Australia, legitimate grievances with the head office appear to be widespread. But there’s also a flip side: one of the biggest problems for franchisors is finding franchisees who can be relied on to stick to brand standards. Last year, 18% of franchisors were engaged in a dispute with a franchisee, and about half of those disputes were about system compliance (fees were the next most contentious issue). 

Lack of compliance by franchisees can have an impact on customers. Last year two Bakers Delight outlets (in the NSW suburbs of Tuggerah and Artarmon) were fined by the NSW Food Authority for failing to maintain clean equipment and not doing enough to get rid of cockroaches, respectively. But Bakers Delight is hardly the only franchisor whose franchisees aren’t always adhering to standards. A number of Domino’s Pizza outlets in NSW (in the suburbs of Cambridge Park, Campbelltown, Forster, St Marys and Willoughby) were also recently fined for failure to maintain clean conditions, and franchisees running Donut King, Eagle Boys Pizza, Gloria Jean's, Hungry Jacks, McDonald’s, Nando’s, Pizza Hut, and Subway outlets also made the NSW Food Authority name-and-shame list for various infractions. 

When it comes to consistently living up to the brand’s promise, some systems appear to be working better than others. For instance, Michel’s Patisserie was named the Australian ‘Coffee Shop of the Year’ for the second year in a row based on a Roy Morgan customer satisfaction survey, beating out McCafé, Muffin Break, The Coffee Club, Gloria Jeans, Hudsons Coffee, Donut King and Starbucks. The Franchising Council of Australia also keeps tabs on what it views as Australia’s best franchisors and franchisees. Franchisor of the Year awards for 2012 went to 7-Eleven and Luxottica (whose franchises include OPSM and Sunglass Hut), while individual franchisees running PoolWerx, Sign-a-Rama and Mister Minit outlets were also named. 

Finding good help 

Franchises promise a comforting sameness, but franchisors also have to worry about unauthorised activity by franchisees, such as sneaking in products not offered by the company, or cutting overhead costs at the expense of the customer. By definition, franchises limit choice. A number of franchisees we interviewed expressed frustration at not being able to customise their offerings to meet the needs of a customer base they understand best. 

Such frustration can lead to a further concern for franchisors - a phenomenon known as brand piracy, in which franchisees adopt the franchise’s approach and a similar look and name once their agreement expires. In the end, the quality of a franchise shop depends on the quality of the franchisee, according to Professor Lorelle Frazer, director of the Asia-Pacific Centre for Franchising Excellence at Griffith University Business School. “Franchisors find it really hard to find good franchisees, and if they find a good operator, they’re very likely to renew their agreement.”

 

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