Franchise Association / Franchise Council

Franchise consultations

Franchising is characterised by an intensive partnership between the franchisor and the franchisee, in which good communications are of great importance. Good communications between the franchisor and the franchisee are beneficial to both. In this way, the franchisor learns from the experiences of the franchisees in every-day practice and can adjust the policy of its formula accordingly, while the franchisee is given the opportunity to influence the policy and the development of the formula. It furthermore enables the franchisee to obtain valuable information from the organisation, which it can use to achieve a higher turnover.

Good consultations are essential in order to make and keep the formula successful. The Franchise Act recognises the importance of consultations and stipulates that consultations must take place between the franchisor and the franchisee at least once a year. However, the larger the franchise formula becomes, the more difficult it is to organize such consultations. There are simply too many franchisees, which makes it impossible in practice to consult with all of them and to coordinate the policy.

Structured consultations in the form of a franchise council or a franchise association provide a good and practical solution for this issue. The most important difference between a franchise council and a franchise association is that a franchise council is made up of representatives of the franchisor and franchisees, whereas a franchise association consists solely of franchisees. More about the franchise council and the franchise association can be read below.

 

Franchise Council

The franchise council is a central consultative body in which both the franchisor and the franchisees are represented. A franchise council is usually a practical consultative structure if it comprises upwards of 10 franchisees. Often, the franchise agreement contains a provision regarding the franchise council, which specifies at what time a franchise council will be set up and in what way consultations will take place until that time.

The franchise council periodically discusses the matters relevant to the formula and advises on all kinds of matters, with the overall interests of the formula being at the centre. The franchisees who are members of the franchise council generally know what is going on among their fellow franchisees. To that extent they represent all the franchisees of the formula.

Although the franchise council as a rule has an advisory role only, it is wise for the franchisor to take (the advice of) a franchise council seriously. This will not only increase its support and credibility within the organisation, but will also prevent the inadequate functioning of the franchise council from being labelled a breach in the event of a dispute with the franchisees.

 

Franchise Association

If a franchise organisation continues to grow, a need will often be felt to lay down formal rules for the representation of the franchisees. From about 50 franchisees onwards, an Association of Franchisees is often set up. An Association of Franchisees, or franchise association in short, is a legal entity with members. The board of the association represents the interests of all the franchisees in their dealings with the franchisor. The franchise agreement may stipulate that every franchisee must be a member of the franchise association.

The main difference with the franchise council is the fact that the franchise association consists solely of franchisees. Whereas a franchise council keeps an eye on the overall interests of the formula and acts as a collective advisory body, a franchise association merely serves the interests of the franchisees.

A franchise association usually has a board with a mandate to represent all the members. This mandate has the important advantage that the franchisor is dealing with one professional party and not with all franchisees individually. If the board of the franchise association supports certain developments or agrees to certain plans, it is no longer necessary for the franchisor to meet with all the individual franchisees. To this is added that the board of a franchise association usually knows very well what is going on among the franchisees, so that these issues may be discussed collectively with the franchisor.