Franchising is a business model that has gained immense popularity over the years, offering entrepreneurs the opportunity to own and operate their own businesses under an established brand. One of the most iconic depictions of the early days of franchising is portrayed in the film “The Founder”, which chronicles the story of Ray Kroc and the creation of the McDonald’s fast food empire.
While the film dramatizes real events, it provides valuable insights into the ‘dos’ and ‘don’ts’ of franchise agreements. Let’s delve into some key lessons from the film.
The Dos
Clear Vision and Brand Identity
The success of McDonald’s began with a clear brand vision – consistent quality, speed and affordability. Do define your brand’s unique selling points and values clearly in the franchise agreement. Ensure that franchisees understand and are committed to upholding these values.
Thorough Training Programs
In the film, Ray Kroc insisted on comprehensive training programs for franchisees. Do establish a detailed training protocol in your agreement to ensure that franchisees understand your business operations thoroughly.
Standardisation
McDonald’s achieved success through strict standardisation of processes and products. Do emphasise the importance of adhering to set standards, from menu items to customer service, in your franchise agreement.
Continuous Support
Provide ongoing support to franchisees, just as Ray Kroc did in the film. Do outline the types of support franchisees can expect, including marketing assistances, operational guidance, and access to new technologies.
Territorial Rights
Clearly define the territories in which franchisees can operate to avoid conflicts and competition among franchisees. Do establish territorial rights and limitations in your agreement.
Marketing and Advertising
Franchise agreements should outline marketing and advertising responsibilities. Coordinated efforts can boost brand recognition and customer loyalty.
The Don’ts
Rushing the Agreement
Ray Kroc’s haste in the film led to conflicts and legal battles. Don’t rush the drafting of your franchise agreement. Take the time to ensure all terms and conditions are clear, fair, and legally sound.
Overly Aggressive Expansion
Avoid aggressive expansion without considering market demand and saturation. Overexpansion can dilute the brand and lead to franchisee dissatisfaction.
Ignoring Legal Advice
Ray Kroc’s initial handshake agreement came back to haunt him. Do not ignore legal advice. Consult experienced franchise attorneys to ensure your agreements comply with all relevant laws and regulations.
Lack of Communication
Effective communication is essential. The film portrays conflicts arising from poor communication between Ray Kroc and the McDonald brothers. Maintain open lines of communication to address issues promptly.
Neglecting Franchisee Feedback
Listen to your franchisees and consider their feedback. Ignoring their concerns can lead to unrest and disputes. Create channels for open communication and conflict resolution.
Failure to Adapt
In “The Founder”, McDonald’s evolved to adapt to changing customer preferences. Don’t lock franchisees into rigid agreements that don’t allow for flexibility in response to market changes. At the same time, franchisors may want some control on what action franchisees take in response to market developments. If you are a franchisor, do consider wording the clause to protect your interests in the franchise.
Conclusion
“The Founder” serves as a compelling cautionary tale and a source of inspiration for anyone involved in franchising. While the film dramatizes certain aspects of the McDonald’s story, it underscores the importance of well-crafted franchise agreements that balance the interests of both franchisors and franchisees. By following the ‘dos’ and avoiding the ‘don’ts’ outlined in this article, businesses can create franchising agreements to foster growth, maintain brand integrity and avoid disputes.
Should you need advice on your franchise agreement, please do get in touch with our Intellectual Property, Data Protection and Technology team by phone 0345 450 5558 or by email enquiries@stephens-scown.co.uk