The contract arrangements between the parent company and the small-business franchisee will vary with every set-up, and there is usually the payment of fees to allow the small business to use the name and logo of the bigger company.
A report by Franchising Australia recently indicates that there are over 1000 franchised brands operating in Australia in 2010. However, there are many pitfalls – particularly for the inexperienced small businessman wanting to open a franchise.
Many of these were highlighted in the annual franchising report by the Asia Pacific Centre for Franchising Excellence at Griffith University in Queensland, which showed that almost one quarter of the businesses had serious disputes between the franchisees and the large companies. The most often-quoted reason was a failure of the business holder to toe the company line of the parent company.
The GFC (Global Financial Crisis) also had its toll, with Australia losing seven per cent of franchises over the past couple of years.
www.news.com.au/business/business-smarts/aussies-clueless-about-owning-franchises/story-e6frfm9r-1225967557635
Co-author of the report, Professor Lorelle Frazer said that you cannot go into a franchise such as Baker's Delight for instance and try and change the colour scheme. She noted that many enter franchising without doing their homework, and may not realise the restrictions. Almost half these small businessmen said they went into a particular franchise based on their gut feeling,
To Steve Wright, Executive Director of Franchise Council of Australia, however, the reports of disputes shows that franchise businesses are willing to use mediation to get disputes resolved as quickly and efficiently as possible - rather than stonewall or go straight to litigation – and that this is a healthy sign.
He explained that the average term of a franchise agreement is six to seven years, and that ninety-four per cent of franchisees choose to go for a second term; and most of those are granted a new agreement by their franchisor.
Well-Being Australia chairman Mark Tronson said that having read this article he was struck by the similarities between franchises and Christian Denominations and their churches. Many of the franchisees (the 'corner store' suburban church) function well: - they have ministers that are round pegs and fit into congregations that are round holes.
But things do go wrong in some of these local congregations and disputes occur for all sorts of reasons, and they are sometimes difficult to resolve.
There are dispute resolution procedures within denominational structures and ultimately someone carries the can. Sometimes it's a congregation member or family clan who has held considerable sway in the local congregation who suddenly finds themselves on the outer. Sometimes the minister has overstepped an unseen line.
I recently heard about an ordained Anglican minister who had trained overseas and returned home to Australia. He applied to two capital city diocese for accreditation, and got the clear impression from one that because he wasn't trained in that city, there was no position available, and from the other, he was not the right theological mix.
A regional diocese warmly welcomed him. In other words, like a small businessman looking for a franchise, he 'did his homework' by approaching different 'parent companies' and eventually found one that suited both himself and the needs of the 'customers'.
The non-conformist churches such as the Uniting, Baptist, Salvation Army, Churches of Christ, Reformed and others, have well-documented procedures to place ministers into churches where friction is unlikely. This is similar to the parent company and the small business holder negotiating their terms to mutual benefit.
The Pentecostal scene is very different. In these church structures, the Pastor has control and when trouble occurs, congregants sometimes leave. In many instances congregation members will move from church to church in an attempt to find one that meets their needs. Occasionally, Pastors fall on their swords if they are unable to build a congregation.
This situation is more like the congregation acting like the customers of Baker's Delight or McDonalds. It is they who have the choice whether to attend that particular church or another (like the customers deciding to shop at a differently branded store, maybe Hungry Jack's, instead). This would represent a franchise that 'failed' and any disputes with the parent company were unable to be resolved, or that no mediation had been possible.
Research has shown that today there is little denominational loyalty in many Christian churches, and therefore it requires delicate negotiations to find the right minister for a particular congregation, but one who will nevertheless 'toe the Denominational line'.
To Mark Tronson, this seems very like the relationship between a large organisation and a franchisee, which both aim in the long term to gain customer (congregational) support.