Franchising: When You Over Promise and Under Deliver

When it comes to franchising the last thing you ever want to be faced with is the claim by a franchisee that you “Over promised and under delivered.” The minute a franchisor hears this he/she might as well just take a dagger and insert it into his/her chest.. slowly.

If this comment does not bother you then quite simply you should not be franchising. The idea of franchising is not only to brand your business, but to provide others with a turn key solution that will make them successful. After all, the success of your franchisees will determine the success of your franchise system.

I think it is GREAT that the California Supreme Court made a ruling earlier this month supporting this notion by over ruling an arbitrator’s initial decision which was originally in the franchisor’s favor. Basically this is what happened: Person bought a franchise and was not provided with the full training promised, not provided with operations and support materials promised and was not given the guidance and assistance as promised for the operation of the business when it opened thus resulting in immediate failure. Wow this is terrible.

End result, the franchise agreement provided that for any alleged breach of the franchise agreement (provided there is written notice of such breach) the franchisor has 60 days to remedy it. The franchise agreement further stated that in no event such material provisions of the franchise agreement are to be modified or changed. Guess what, when the franchisee appealed the original ruling (which was in favor of the franchisor) the franchisee won. The ruling dismissed the 60 days as mentioned above because if the franchisee had been given notice of the inadequacies at the time, the franchisor might have effectively cured the breaches and forestalled the disaster resulting in a failed franchise. For more detail see Gueyffier v. Summers (June 2008).

The moral of this story, if you say you are going to do something do it. Seems pretty straight forward, right? You may be surprised how many do not abide by this basic rule thus destroying their integrity. Franchising is no different. That’s my story and I am sticking to it.