THE CARROT: ENCOURAGE AND REWARDING FRANCHISEE’S COMPLIANCEDon’t expect all franchisees to adhere to the letter and spirit of your franchise agreement. Sometimes franchisees think they know better. Sometimes franchisees find it difficult to follow a detailed operating system. Sometimes franchisees have difficulty making ends meet.
The moral authority of your franchise agreement will, in fact, cause most franchisees to comply. People generally tend to live up the agreements they enter into. What to do about the few who can’t or won’t? Of course, there is the legal route: default notices, probation, mediation and termination. Before this, though, smart franchise companies systematically reduce the number of franchisees who don’t comply.
Franchisors reduce noncompliance by providing strong incentives to franchisees to comply with their system.
At Scott C. Kern, Attorney at Law, LLC we help clients design and implement systems that make it clear to their franchisees that strict compliance with company policy is the best course.
Some programs include:
- Contests with valuable prizes for good performers.
- A formal system of ranking franchisees into tiers by performance, with benefits attached to the status of high performer.
- Programs that recognize good performance and publicize it to others in the system.
- Significant economic benefits such as contract extensions or subsidies for point of sale marketing materials or equipment for high performers.
- These programs and others like them are proven to encourage good performers to be better and poor performers to raise their level of compliance.
Make sure that these programs, which discriminate among franchisees, do not run afoul of your franchise agreement or local franchise law and regulation. Look to us as the Franchise Law Source to assist you with implementing these important incentive programs.
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