Who Needs a Franchisee Advisory Council?

IFA’s Best Practices Series offers advice on a host of key franchising topics.

By Larry Tate

The International Franchise Association’s Franchise Relations Committee has published a number of handbooks in the past 10 years on subjects for improving relations between franchisees and franchisors. Several have been updated to reflect current issues. These new handbooks are described as the Best Practices Series.

Others are in the process of being updated, with chapters written by committee members, to address new developments like Internet opportunities and independent franchisee associations.

One of the most popular and widely-used of the series is “How to Organize a Franchisee Advisory Council,” which is being updated and is scheduled to be released this fall. The initial decision to establish an FAC involves a leap into the unknown for both franchisees, franchisors and suppliers. Picture this scenario as a starting point.

Picture This––

VP Franchising: We need to form a Franchisee Advisory Council.

CEO: What for? Everything is fine now. Royalties are current. We don’t have any big problems. Everybody is making money. They’re happy.

VP Franchising:This is the best time to do it. When things are going well. If issues should come up in the future, we would have a place to take them for discussion and work-out.

CEO:Who would be involved and how much time would this take?

VP Franchising:A group of management people would meet with franchisees maybe twice a year for a day and a half or two days. We’d pay the franchisees expenses to attend.

CEO: Who would go from corporate?

VP Franchising:Ideally, the decision makers, including yourself, all of senior management, directors, department heads. Probably 35 or 40 company people would participate.

CEO: You must be kidding. You want me to commit to spending two days of my time, twice a year, along with 40 others from corporate to talk about problems we don’t have. Think of the time and the cost. The last thing we need around here is more meetings.

VP Franchising: This is the perfect time to set up a Franchisee Advisory Council—when we don’t have any big problems or issues with our franchisees. If we ever do have issues, the FAC becomes the place to discuss them, before they fester and grow into a crisis or a legal thing with litigation. If we wait until we have problems to set it up, it will probably be too late.

CEO: Let me think about this. I’ll get back to you.

Something like this conversation is likely to take place when a franchisor is considering whether or not to set up an FAC. This particular vice president suggests 30-40 company representatives in attendance, however, in a smaller or start-up franchisor, the number of company representatives would be much fewer. The most important thing is that the franchisor’s decision makers be present and participate.

Cue the Franchisees

Now it’s time to bring the franchise community into the loop and inform them of the plan to organize a Franchisee Advisory Council. That scenario might go something like this.

VP Franchising:You’re one of our most successful franchisees. I wanted to get your feedback on a new idea. We’re considering organizing a Franchisee Advisory Council, with 15 or 20 franchisees on it, to meet twice a year with a big group of company decision-makers, to discuss issues that would make your business better and strengthen our brand and system.

Franchisee: Well, everybody is pretty happy right now. How would the franchisees get picked to be on it?

VP Franchising: The company would choose franchisees for the initial term. After that they would be elected by the franchisee community.

Franchisee:Some franchisees will think the company hand-picked the friendliest franchisees who are most likely to rubber-stamp whatever the company wants to do. And would avoid the more outspoken franchisees who sometimes question what the company is doing.

VP Franchising:The company wants the most successful and best operators in our system on the FAC. We’ll probably ask you and some other franchisees like you, to suggest the names of franchisees to be considered for appointment to the start-up FAC.

Franchisee: What kind of authority will the FAC have to make decisions and make policies?

VP Franchising: The company will continue to make decisions and policies, but the FAC will have important input on both existing and new policies and programs. The FAC would be consulted before any significant new programs were announced or implemented. The FAC will be advising and recommending at the highest level, but it is not a decision-making group.

Franchisee: Will the CEO attend the FAC meetings or just make an appearance and wait for an executive summary later from somebody.

VP Franchising: The CEO will attend the full meetings, along with all senior management. We want the decision-makers to hear what our franchisees are saying and thinking about our present activities and about what the company is planning for the future.

Franchisee:Who sets up the meeting agenda? Would the company dictate what we could talk about or is any subject okay to put on the table, without restriction?

VP Franchising:Anything that will make our franchisees more successful and improve the brand overall can be discussed. We wouldn’t address any individual legal issues or grievances, just topics that affect the whole system.

Suppliers Too!

Now we’re ready to consider the third leg on our three-legged stool—suppliers. Vendors and suppliers have an interest and role to play in the organization and operation of a Franchisee Advisory Council.

Here’s another possible conversation with a supplier.

VP Franchising: You’re one of our major suppliers and we’ve been doing business together for a long time. I wanted you to know we’re planning to organize a Franchisee Advisory Council with 15 or 20 of our largest and most successful franchisees on it. The FAC would meet twice a year to discuss current issues.

Supplier No.1:That’s great. I’d like our company to attend and be on your FAC agenda for every meeting, so we can promote our newest products and address any problems any franchisees may be having.

VP Franchising: We’re still working on how the agenda will be set up. But we can probably fit you in at every meeting.

Supplier No. 2:I heard the other day that you were setting up an FAC and that Supplier X is going to be at every meeting to make a presentation. Our company would like to be at the meetings as well. Can we count on that? I know you want to be fair and not favor one supplier over another.

VP of Franchising: We may have to re-think how our suppliers will fit into the FAC agenda. I can’t commit to your company having time on the agenda at every FAC meeting. I’ll have to get back with you on that.

Eventually, you’ll have to add additional requests for agenda time from suppliers of mystery shopper services, customer feed-back, MIS help desk, national contract vendors, real estate, construction and equipment suppliers, and so on.

Yes, there is a myriad of details and issues to be decided in organizing a Franchisee Advisory Council. But the Franchise Relations Committee “How to Organize a Franchisee Advisory Council” handbook is an excellent resource to use in negotiating the sometimes rocky road to a successful FAC. Having a charter and by-laws is a must. There are nine examples of actual charters and by-laws in this best practices series handbook. The chapter titles include:

•Legal Aspects of Franchisee Advisory Councils

•The Need for Franchisee Advisory Councils

•How a Successful FAC is Organized and Operated

•Importance of an FAC Charter and By-Laws

•Nine Examples of Sample Charters and By-Laws

•Goals and Objectives for an FAC

•Membership on a FAC—Criteria

•FAC Officers and Their Duties

•FAC Committees and Their Functions

•FAC Meeting Dates and Locations

•Setting the FAC Meeting Agenda

•Advisory Committees to the FAC

•Franchisor/Franchisee Roles in a FAC

•Policies for FAC Expenses

•The Importance of Follow-Up Procedures

•Do’s and Don’ts in Organizing an FAC

•Sample FAC Meeting Agendas

•Sample Letter to Franchisees Announcing Formation of an FAC

•Sample FAC Qualification and Nomination Form—Sample Ballot

Other Best Practices handbooks in the process of being written or updated include: “Transfers and Succession Planning,” “How to Improve Franchisee/Franchisor Relations,” “Mentorship Programs,” “Financing for Multi-Unit Franchisees” and “How to Form a Co-Op.” Those already completed are titled “Improved Communications Means Improved Franchise Relations” and “A Dispute Resolution Handbook for Franchisors and Franchisees,” which are available from the government relations page under the self-regulation heading of the IFA Web site at Franchise.org.

Returning to the above scenario of conversations about forming a new Franchisee Advisory Council, we find the outcome was positive and resulted in a highly-effective and successful FAC.

This could be the dialogue five years later.

VP Franchising:As CEO, how do you feel now about the time and money our company has invested in the past five years to organize and operate our Franchisee Advisory Council?

CEO:It’s the best money we ever spent. We worked out some big issues that came up unexpectedly. And the contributions the FAC has made to our marketing, operations, new unit development and brand improvement has far surpassed my expectations. I don’t know why we didn’t do it sooner.

That kind of result is the hoped for outcome of putting in practice all of our “best practices” publications.

Larry Tate is senior vice president of Golden Corral Buffet & Grill and chairman of the International Franchise Association’s Franchise Relations Committee. He can be reached at 800-284-5673 or at .