Effecting Change in Franchise Networks

Sometimes, modifying a mature franchisor's concept and system requires franchisees to make only slight changes. Other times, substantial unit renovations, franchisee retraining and new product/service offerings are involved. In other instances, a complete system overhaul is involved, requiring franchisees to retrofit their units completely to the new concept, operate under new trademarks/service marks and deal with entirely new product/service lines in lieu of existing product/service lines.

Frequently, the mature franchisor's attempt to overhaul its system encounters resistance from franchisees, which can range from slight to massive depending upon the degree of franchisee investment required; franchisee uncertainty about what the economic impact of the contemplated changes will be; the sometimes disparate burdens the overhaul will trigger among franchised units; the number of years remaining before franchise expiration; and franchisee inertia (“I've been doing this for so long, I don't want to change my ways now”). The ability of a mature franchisor to effect such system/concept changes largely derives from the reserved contractual right to do so. Franchise agreement language addressing this subject is critical.