Question

The franchisor from which Eric decides to take a franchise is called Fishy Fishy Fries, Inc.. Fishy Fishy Fries imposes on its franchisees’ certain standards of operation, personnel training methods and procedures for the dismissal of “unsatisfactory” employees. Discuss the issues raised by the desire of a franchisor to exercise a degree of control over its franchisees.

Answer 1

                                    A franchisor is an entity, who is a person or a company who grants the license to a third party or a franchisee and allows them to use the rights over trademarks of the company to do a business. It has to be kept in mind that the franchisor owns the original trademark rights and hence has the right to pose a control over the franchisee so that it does not compromise with the identity of the franchisor.

                                    The franchisor-franchisee relationship is made over the following conventions

· Permits the franchisee to carry out a particular business based on the know how of a franchisor and under the brand name of the franchisor

· Allows a degree of control for the franchisor over the franchisee so that the brand name is not compromised.

· The franchisor to support the franchisee so as to carry out the business.

                                              The International Franchise Association [IFA] defines franchising as a continuous relationship where the franchisor is expected to give only licensed privilege to the franchisee and not extreme freedom to conduct the business. But it has to be kept in mind that although Competition and anti-trust laws defines the relationship between the two, certain franchisors makes certain other strict regulations over the franchisee on conducting a business. The following may be the ill-effects of such a franchisor-franchisee relationship.

· The additional regulations imposed on the franchisee will pose limitations on the market strategy of the franchisee and hence will result in the diminishing product value.

· As it doesn’t form a part of an agreement, It doesn’t have a legal backing and may result in destroying the relationship between the franchisor and franchisee.

· The franchisor has the legal backing to control the franchisee for purposes that may destroy the brand name. Thus posing other controls will prove dissatisfactory for the franchisee’s freedom over marketing.

· Once the franchisee marketing technique gets altered due to the specific controls, it would result in product marketing and may reduce the brand name in the long run.

                                               Thus, from the above analysis, it can be seen that a although a franchisor has the legal backing to have control over the franchisee, it should not affect the freedom of franchisee unless it has no effect on the brand name of the franchisor