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The relationship between a franchisor and a franchisee needs to be built on trust so that both parties can enjoy the rewards of franchising. The franchise agreement is one of the ways that trust is built. This is because it is a legally binding document that governs the rights and obligations of both the franchisor and a franchisee. As a franchisor, it is important that your franchisees comply with the agreement and act in good faith. This article will explain how you can ensure franchisee compliance as a franchisor in New Zealand.

Why Is Franchisee Compliance Important?

Compliance is important to ensure your franchisees are following the terms of your franchise agreement. If they do not, your franchise model could break down. Therefore, you should implement processes so that the whole franchise network runs smoothly. Indeed, a franchisee that does not follow these processes is a liability to not only you but also to other franchisees. 

How to Ensure Franchisee Compliance?

Vet Your Franchisee

Making sure your franchisees are compliant before you bring them on as franchisees. It is vital that you vet your franchisees to make sure that they will be successful business owners who follow all the tasks related to franchising. 

Specifically, you should contact your franchisee’s references to ask them how they are as a person. Additionally, you should find out how your prospective franchisees behave in a commercial environment. Any negative feedback you receive could suggest they may be unsuitable. 

Build a Good Relationship With Your Franchisee

Another way to ensure franchisee compliance is to build a successful relationship with your franchisee. A successful relationship will mean that your franchisee trusts you and is more likely to follow the franchise agreement. 

One way you can build a successful relationship is to be in constant communication with your franchisee. This might involve checking up on how they are going. You could also offer help if they are struggling with a specific part of the business.

A good relationship between a franchisor and franchisee creates a better outcome for all parties.

Offer Training to Your Franchisees

Before your franchisee starts operating, you should offer them training. Training will allow your franchisee to become familiar with your business’ processes and products. As a result, your franchisees will not go into the business blind. Instead, they will have some idea as to what to expect when they start operating. Importantly, training will build the groundwork for a more successful business, meaning that your franchisees are more likely to be compliant. Additionally, you could also offer ongoing training if there are any changes to your business model.

Appoint Master Franchisees

A master franchisee is a franchisee who has the ability to appoint new franchisees in a specific area. Essentially, they become the franchisor for a specific locality. Master franchisees are also the first point of contact for franchisees in their specific area. 

By being a more accessible point of contact for your franchisees, master franchisees will keep your franchisees compliant. Your master franchisees are also able to check in on other franchisees more often. This is especially important if your franchising business has expanded overseas.

It is important that you appoint master franchisees that you trust so that they do a good job of checking up on their franchisees. 

Key Takeaways

Franchising is an important business structure in the commercial world as it allows businesses to expand quickly without the need for a significant amount of capital. The franchise agreement will govern the relationship between the franchisor and franchisee. A non-compliant franchisee can cause headaches for franchisors and could lead to negative effects for the business as a whole. Therefore, franchisors should partake in different practices to make sure that all their franchisees are compliant. 

Specifically, they should:

  • vet franchisees;
  • build and maintain strong relationships with franchisees;
  • offer training; and
  • appoint master franchisees.

For legal assistance with franchising, contact LegalVision’s franchise lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can I terminate the franchise agreement if my franchisee is not compliant?

You can only terminate the franchise agreement if your franchisee breaches a term in the franchise agreement.

Do I have to offer training to my franchisees?

No, you are not legally required to offer training. However, it is a good idea that you do so that your franchisees are able to run a successful franchise. 

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