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Questions-Answers: Franchise

Operating Standards:

Does the Franchsor has every strict operating standards and a method by which adherence to these standards is mandated OR does the Franchisor have a more open “freedom within a framework” standards and allow their Franchisees the flexibility to make local operating decisions within specific guidelines to maximize the value of their individual business.

The franchisor has many strict operating standards such as a brand book, premises standards, standards of personnel’s performance, and standards of services provided. A research conducted by Katz and Green (2009) also revealed that the franchisee is mandated to admit any changes required by the franchisor. There is a method that mandates adherence to these standards: if there is a failure to comply with these standards, the franchisee should be strictly punished. The majority of franchisors force the franchisee to endorse a contract by denying their authority from following federal right. Thus franchisees have little legal power.



Is there a defined process by which the Franchisee must approve any/each change to standards by the Franchisor?

There is a defined process according to which a franchisee must approve any/each change to the franchisor’s standards. According to the method, no alteration will be done to any rectifications in advance approved by franchisor without franchisee resubmitting exchanges for the consideration of the franchisor. Kushell (1984) also asserts that the franchisee should exploit merely stocktaking, which adapts to the norms and is purchased from a seller or producer appointed as “approved” by the franchisor. Besides, the franchisor retains the power to reject any transmission, and franchisee consents that such disapprobation must be accepted. Franchisee guarantees that all over the assurances in the different statements are real as from the moment done without respect to whether similar were assured by the franchisee. However, there is an exception when the franchisee has informed the franchisor about the exchange in introductions and guarantees and the franchisor has approved the change.


Primary Operating Standards:

What is the primary method by which the Franchisor exerts control over the operations of the Franchisee?

The main method by which the franchisor exercises control over the operations of the franchisee refers to the provision of conditions under which the franchisee’s salary will be reduced in case of failure to comply with the rules and recommendations of the franchisor. The franchisee takes most of the financial risk but is able to gain access to a respected branded product and services provided by the brand owner. The necessity of franchisors to carefully operate business processes is highly cut because franchisees perform a greater number of daily supervision of the franchise (Evans, 2015). Thus, franchisors can maximize their incomes because the franchisees are responsible for controlling the business according to the state and federal rights. The franchisor, on the other hand, is able to use the franchisee by constructing a spread network.

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