It’s a provocative title, but isn’t that the million dollar question that at least one side of the relationship is always asking? Owning a franchise is always tricky because the franchisee (owner) would like to see more value for his/her dollar and the franchisor (their boss) always feels that their name alone is worthy of praise and since they did all the hard work establishing it – way back when Grandma and Grandpa were smooching at the drive-in – that customers and franchisees should be lining up to dump money in their tills.
–> Times have changed. <–
Ask Dunkin’ Donuts in Quebec who’s bottom got tanned recently for a total neglect of their brand and for ignoring their franchisees for just a little too long.
This article by Mcarthy Tetrault walks through the situation in depth. There is one paragraph, however, that I would like to draw the reader’s attention to as follows:
In the Franchise Agreements, the franchisor promised to protect and enhance both its reputation, and the “demand for the products of the Dunkin Donuts System” – in sum, the brand. The Court found that, despite the fact that the franchisor had assigned to itself the principal obligation of protecting and enhancing its brand, it failed over a period of a decade to protect its brand. The Court concluded that brand protection is an ongoing, continuing and “successive” obligation and that franchisees cannot succeed where the franchisor has failed to in this fundamental obligation. According to the Court, the franchisor has a duty to minimize losses and reposition itself in a changing marketplace. Although the Court made mention of the civil duty of good faith and of loyalty owed by franchisors to franchisees, no analysis was undertaken as to what that meant in these circumstances apart from a duty to work “in concert with” the franchisees in such market conditions.
The article then goes on to conclude:
Unfortunately, there is next to no guidance in the decision as to what, practically speaking, it means to protect the brand. Clearly, a franchisor cannot be content to rest on its past success. It must innovate and rejuvenate. However, beyond that, the decision is quite unhelpful.
I disagree that the decision is unhelpful. I know that lawyers are always looking for black and white and would salivate if a crystal clear cookie cutter judgement would have resulted from this case for ease of use in all their upcoming cases of a similar nature – so maybe in that case it’s not ultra-helpful for lawyers. However, from a franchisee’s perspective, this case is monumental and has significantly contributed to the greater good of the future of the franchise system in Canada. Now franchisees across the country can stand up with great confidence together to make sure that their franchisor is not letting their assets and life investments get eaten up while they sip martinis watching the fireworks while hooting their hardy-hars on their yacht out in Coal Harbour (you gotta be from Vancouver to real feel that one).
It allows franchisees to ask of their franchisor questions like these:
- What is my franchisor doing to combat competition in my market?
- Does my franchisor have any concrete plans to combat competition or do they plan on riding old systems hoping they keep working?
- What is the value of the brand I’m paying for?
- Is the brand I’m paying for decreasing, stagnant or increasing in value?
- Where under the sun is my marketing pool money going?
- Has my franchisor allowed the dilution of the brand I’m paying good money for (ie. notable inconsistencies across the brand, unclear core business, multiple direction changes that confuse the customers, etc)?
- What kind of calibre leadership does my franchisor employ? What are their credentials? Were they hired because they are best for the job or because they grew up with the franchisor’s son’s girlfriend’s uncle?
- Am I a member of a group like the VCSFA which facilitates the banding-together of other coffee shop franchisees to address such important things or am I an island on my own?
Now think about the franchise coffee market in Vancouver and the competition. Which brands are in competition with each other? You can go to our increasingly exhaustive list of Vancouver coffee shop franchises page called “FRANCOUVER” to run this question yourself.
At the VCSFA we have plans to conduct surveys to find out how much your brand is being affected by other competing brands. Be sure to become a member so you can gain access and even help contribute towards these important future works.