Normally, after having signed the franchise agreement, there is a 3-6 month timeline for franchisees to get their franchise business up and running. If everything goes according to plan, all parties in the franchise relationship will be happy. But sometimes, unexpected scenarios appear and throw a wrench in the gears, causing the date for the planned opening to be missed.
Now that the grand opening of the franchisee’s business is already off to a bad start, franchisors can tell themselves that at least the worst is over and can concentrate on meeting the postponed opening deadline now. Or is it?
1. Additional Expenses
For franchisees, being prepared for their grand opening points to two actions that they have already performed — having secured their place of business and hired the required number of employees. This also means they have taken up two major expenses for most businesses: rental payments and employee salaries. With a delayed opening, franchisees will have to incur these costs while not being able to start earning back their invested capital. Consequently, the rainy day fund that franchisees set aside just got smaller.
But the franchisor isn't spared from bearing additional costs too. The longer it takes for franchisees to open their doors, the longer the franchisor needs to provide support resource, i.e. franchisor representative to oversee the development of the new franchise store, attention, time, etc. By using more than the planned resources set aside for the opening of a new franchise store, the franchisor will have have less on their hand to pursue other organizational interests like attracting new franchisees and improving the franchise system.
2. Negative Brand Image
The enthusiam that franchisees exude at the start will be diminished upon realizing that their grand opening will be delayed. As a result, poor morale will set in, which will be difficult for the franchisor to bring back up again.
While happy franchisees make for a good franchise system, the reverse for this is also true. Unhappy franchisees who are frustrated and discouraged, could start to perceive their investment as a bad decision and this will likely translate into negative customer experiences. What could happen next is the the customer who experienced that bad service will probably condemn the whole brand and every store flying the same flag, whether franchised or corporate owned.
3. Strained Franchisor-Franchisee Relationship
Whenever something goes wrong, the natural defence mechanism in all of us often starts to find someone else to blame. Whether as a method of anger release or to side-step consequences, whatever the case, franchisees will likely not accept any part of the fault and will probably say “Why didn’t you tell me that?”
In this case, whether the delay was actually caused by the franchisor’s oversight doesn’t really matter anymore. Franchisees will be blinded by frustration and start to suspect the franchisor’s commitment and competence towards the franchise system. Meaning to say, trust could very well be on its way out the window.
And the worst part, the long term contract that was signed just got a lot longer because this is how the relationship between franchisor and franchisee is being kickstarted.