Question

why would these cause disagreements between franchisor and franchisees.

Some of the top disagreements between a franchisor and franchisee will be:

The pricing of products or services

Profit sharing percentage

Service fee

Defined territory of the franchisee set by the franchisor

Advertising and promotions within the locality of the franchisee

Answer 1

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These could cause a disagreement between the franchisor and the franchisee because:-

1. Pricing of the product or services: this is a case where both the parties need to be able to agree to a certain point because each of them has a separate need and requirement from the market. While franchisor needs to be able to penetrate the market and essentially would like to offer goods at a lower price, the franchisee may want to earn more profit margins in order to sustain their day to day operational costs.

2. Profit sharing percentage: this would be a matter of disagreement for the parties because the roles/terms of the partnership may not have been discussed clearly, or, one of the partners do not make enough profit as to justify the need for the partnership in the first place.

3. Service fee: this could be an issue in the case that the country has a different law regarding how the business needs to operate which might not be the same for the franchisor therefore, they would not easily understand the point of this fee and essentially cause a debatable environment.

4. Defined territory of franchisee set by the franchisor: a franchisee was a business that might have been operation way before the franchisor came into the picture, therefore, they might have a different idea of the market and their own needs and the designated area that is set by the franchisor might cause a conflict of interest for the franchisee and essentially create a problem.

5. Advertising and promotions within the locality of a franchise: the first point of a franchisee model is that the franchisor needs to spend a bare minimum for keeping the franchisee operational and function in order to enter the market. Therefore, selling them the idea for advertising might be a hard part for the franchisee to a point that both the parties may not agree to any terms.