Franchisees Should Be Seen And Heard


My dear grandmother would often say that children should be seen and not heard. Her generation believed that nothing valuable could be learned from what children thought or would say to their parents or other adults. Fortunately, at least in the child-rearing arena, this theory has been completely debunked. We now know that our children thrive when we communicate with them, and they with us, starting when they are just infants.

Unfortunately, many franchisors practice this antiquated theory in dealing with their franchisees. They sometimes act like the parents of a bygone era and treat their franchisees like children who do not know anything, have no relevant experiences, and whose thoughts and opinions are of little value. They treat franchisees as if they have complete dominion and control over them—and that is what is somehow required in order for the system to be successful.

So it is with SEI on many occasions in the past. The company has changed policies and procedures, rolled out new initiatives and changed required operating procedures without meaningful input from franchisees. This includes the DVR System, the GEA Form, BT, Scan Audits, unannounced changes in the treatment of Operating Expenses, Low Volume Stores, FIW packages, the transfer of the franchisor’s maintenance responsibility and costs to the franchisee through the FM contract, and many other items. Each of these initiatives was rolled out without meaningful input, communication or collaboration with the franchisee community. This method of implementing system change actually is contrary to the best interests of SEI, its parent company, its franchisees, and the system as a whole. It is truly counterproductive.

In 1996, a franchisee of the Sizzler restaurant chain brought suit against the franchisor complaining about a decision the company made to change the marketing emphasis from the buffet court to the grill concept. The franchisee believed that this was a bad idea, that it would lead to losses of sales and profit and filed suit in an effort to stop the change. One of the bases of the lawsuit was that the actions of the franchisor violated the implied covenant of good faith and fair dealing.

The court went to some effort to point out that this decision had indeed been made with extensive consultation with the franchisee community. In fact, before the decision was made, the franchisor brought the matter to the National Sizzler Franchisee Association. The mar- keting committee of the Association studied the question and the evidence supporting the reasoning behind the proposed change and came to the conclusion that the franchisor was correct. It provided three separate and very specific reasons why it supported the change.

The point of relating to this case is not that the franchisee lost the case, but why the franchisee lost. The court determined that the franchisor could not possibly be acting in bad faith, because it not only had a good and sufficient reason for the system change, but also because it took the extra step of asking its independent franchisee association to endorse the concept before it was implemented.

My friend and colleague, Andrew Selden (now retired from the practice of law) wrote an article on this very subject in the ABA Franchise Law Journal in 2000. Citing extensive research on efficient and productive organizations in general, he stated that change in a franchise system must stem from active collaboration between a franchisor and its franchisees, not from the franchisor’s unilateral actions. He cited widespread evidence that participatory, collaborative and cooperative management leads to the highest likelihood of success in meeting internal and external challenges to the business.

This means that when considering a system change, an enlightened franchisor will bring experienced and knowledgeable franchisees—chosen by their peers—into the process at the outset, not when the process is complete and the mandate is announced. The more involved the franchisees are in the process of researching the issue and the details of the initiative at every stage of its development, the greater acceptance from the wider franchisee community when the process is complete.

SEI has recently stated its intent to reset the relationship with its franchisee community in general, and with the National Coalition in particular. However, as my grandmother also said on many occasions, “The proof is in the pudding.” We hope this reset will include SEI coming to and acting on the understanding that there is a great deal of wisdom and operational experience within the franchisee community. We have large numbers of franchisees who have been owners much longer than many SEI managers have been on the scene. They have a great deal to contribute to making the system more competitive and more successful.

True collaboration and joint planning of system initiatives and changes will ensure greater franchisee buy-in, reduced suspicions of bad faith motives, and less resistance. Communication without concrete changes in the way the franchisor treats the franchisees will not create sustained benefits to any stakeholders in the system. If SEI realizes that its path to greater success is taking advantage of the vast expertise and experience of its franchisee community, there will be fewer conflicts, lawsuits and angry posts on, and happier franchisees, increased store development, elevated goodwill sales, as well as enhanced revenue, profits and value creation for all.