What every Franchisor should know about Franchisee Advisory Councils and Franchisee Associations – Part 1
Advisory Councils
The lines between what is a franchise association and what is an advisory council may be blurred at times. Some franchisors, for example, are given membership privileges and voting rights in a franchise association. Independent franchise associations may also be subsidized by franchisors. However, a common feature of a franchise advisory council is that it is created by the franchisor and exists only with the franchisor’s continuing support.
The franchisor retains a significant amount of control over the activities of the council and its decision making authority. The franchisor will usually prepare the council’s governing documents, establish a method for selection of members (e.g. appointment, election according to regions, etc.) and require certain conditions for membership (e.g. that a franchisee not be in default under its franchise or sub-lease agreements). The International Franchise Association notes that approximately 90% of advisory councils constitute their membership through election, rather than appointment by franchisor.
Advisory councils have existed since the 1960s and have been used by franchisors as a means of communicating to franchisees important developments, such as the introduction of system-wide changes. The advisory council typically meets with the franchisor quarterly or semi-annually. Rarely would the council have veto rights over franchisor decisions, but it is equally rare that a franchisor would ignore the recommendations of its council. The topics discussed by the advisory council can vary considerably and may include discussion of the manner in which goods and services are provided within the system, equipment selection and financing, approaches to advertising, corporate policy, and communications.
There are a number of factors that contribute to a successful advisory council. On the one hand, there is a risk that the council can become a form of “management by committee”, raising the possibility of a system becoming listless and unfocussed. Similar to the complaint that is made of direct democracy, when council members are elected, rather than appointed, there is the possibility of creating a fractious council composed of a disproportionate number of disgruntled members. One of the behavioural dynamics of franchisees within a system, as in most other aspects of organized systems, is that those who are satisfied will more likely be complacent, and thus, displaced by more agitated franchisees. Thus, a council can become a forum providing greater stature and credibility for a vocal minority than might otherwise be possible.
Another aspect in evaluating the success of a franchise advisory council is the extent to which consultations between franchisor and council slow the process of decision making. Additionally, franchisees may become disappointed or disillusioned by an apparent lack of tangible successes by the advisory council. There may also be disagreement over how much decision making authority the council enjoys.
Successful advisory councils have the following characteristics. First, they are chaired by a competent member who keeps discussions focused on relevant issues, and is able to encourage an open but constructive dialogue among other council members. Second, not only must there be involvement by the franchisor at the most senior levels of management, but the franchisor must be prepared to listen and take action on legitimate concerns. The council should not be used as a forum for “divide and conquer” by the franchisor or to subvert the resolution of challenging issues affecting the system. Third, there should be involvement of mature, commercially minded franchisees, who respect the rights and responsibilities of the franchisor and are genuinely motivated to enhance the value of the franchise brand. Those driven by personal agendas do not contribute to the smooth operation of an advisory council. Fourth, aligning messages between the advisory council and the franchisor is important, so as to avoid inconsistencies and confusion among franchisees. Finally, topics of discussion should be of interest to both parties, who should adopt an interest-based attitude to problem solving, rather than the more adversarial, “winner takes all” approach of positional bargaining.