One of the popular activities for many in this period of confinement is to clean up old files, which can sometimes lead to the discovery of very interesting forgotten treasures.
Among these, we found a document published in 1993 by the Ordre des administrateurs agréés du Québec ("Quebec Order of Chartered Administrators") regarding the generally accepted sound franchise management principles which, despite its 37 years, is still relevant today, and even more so at a time when many franchise networks are going through a certain amount of turmoil and have to reinvent themselves.
This document was a chapter of a larger work entitled Guide de la saine gestion des entreprises et des organisations ("Guide to Sound Management of Businesses and Organizations").
This chapter on generally accepted sound franchise management principles was written by a team of franchise experts composed of members of the Ordre des administrateurs agréés du Québec and of the National Institute on Franchising and Affiliated Businesses (now the Conseil québécois de la franchise), which team was led by the late Jean J. Bourret, lawyer, then Chair of the National Institute on Franchising and Affiliated Businesses, and included our Counsel, Jean H. Gagnon, Ad.E..
Here are a few excerpts from these principles of sound management in franchising that remain very relevant today:
"Exercising sound franchise management
The exercise of sound franchise management is expressed through the daily management gestures of those who manage the organizations involved in the franchise relationship.
The exercise of sound management revolves around administrative processes, i.e. planning, organizing, directing, controlling and coordinating executed in accordance with the fundamental management principles, i.e. transparency, continuity, efficiency, balance, equity and abnegation.
In addition, the exercise of sound management of franchise and other similar contractual arrangements necessarily involves the systematic implementation of the following four specific principles:
[Partnership] Character of what determines the commercial relationship between separate legal entities as to the conduct of their mutual management.
Partnership does not necessarily imply the equality of the partners, but demonstrates the fundamental interrelationship in the conduct of their mutual affairs.
The grant of rights from the franchisor to the franchisee creates certain obligations for both the franchisee and the franchisor.
[Uniformity] The character of what is uniform in a franchise system, which is designed and developed by the franchisor.
Uniformity generally extends to all of the elements that make up the franchise system.
The franchisor must ensure that the procedures and other specifications of the franchise system comply with the generally accepted principles of sound management in franchising.
The franchisor must prepare documents and ultimately manuals to serve as operating guides to ensure communication of the elements of the franchise system that need to be consistent. In addition, the franchisor must plan and implement supervisory procedures to ensure the uniformity of the system.
The franchisee must control and ensure the application of the procedures and specifications of the franchise system in the operation of its franchise, thereby complying with the principle of uniformity.
[Viability] The character of what demonstrates the ability and potential of a franchise system to achieve business and financial objectives within the generally accepted principles of sound franchise management. The viability of a franchise system is expressed in each of the elements that make up the franchisor's strategic plan and the franchisee's business plan.
Viability must be demonstrated prior to any business agreement, with each party involved in the process having to share with the other party either its strategic plan or its business plan.
The strategic plan, prepared by the franchisor, expresses the viability of the business model to be franchised. More specifically, the plan describes the position of the business in its environment, sets objectives and presents the means to achieve them.
Viability and transparency
The franchisor must not at any time bias or omit material information which, if otherwise known, would have the effect of diminishing the interest of potential franchisees.
Viability and Continuity
The concept of viability must be in keeping with the principle of continuity and, in this sense, must include elements that demonstrate the willingness of the franchisor to take proper steps to ensure the survival of the franchise system under its management.
[Primacy] The character of what ensures the precedence of the interests of the franchise system as a whole over the individual interests of the members of the network.
In essence, it must be understood that each network member participating in the franchise system must agree to subordinate, to some extent, its individual autonomy to the interests of the network.
More specifically, the franchise network itself represents the larger interest to which both franchisor and franchisee must subordinate, to a certain extent, each of their own individual interests. Each member is therefore dependent on the uncertainties arising from the management and operation of the franchise system.
The franchisor must put in place effective mechanisms and tools to promote the spirit of belonging to the network. In so doing, she/he ensures the safeguarding and defence of collective interests.
Primacy and direction
The decision-maker must assess the negative consequences of any management decision on the entire network. Within this framework, she/he must ensure that such impact is minimized.
Primacy and continuity
Although innovation must be subordinate to the benefit of the community, the franchisor must ensure that the creativity of each member of the network is valued and that mechanisms are in place to express it and eventually put it at the service of the community."
In Canada, sound management practices in franchising can also be found in the Code of Ethics of the Canadian Franchise Association.
Originally published June 25, 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.