The comfort zone is one the most widespread and misunderstood franchise problems. It can make franchise dispute resolution very difficult. It can affect any size of network. It is most prevalent in those where branches have a relatively low sales turnover, particularly where new start-ups commence trading as a single person. Man-in-a-van franchises are an obvious example.
The problem will not become evident until a branch has reached a level of profitability that satisfies the aspirations of the franchisee. At that point the drive for further growth and greater financial reward can begin to be replaced by a desire for a better work/life balance and time to enjoy the fruits of the effort already expended. This situation may be fine for the franchisee but it is highly unsatisfactory for the franchisor who sees the income growth from the branch flatlining and demand for the products or services outstripping supply. This will also damage the brand.
In this situation an ethical and responsible franchisor will provide guidance, support and incentives to motivate the franchisee to expand the capacity of the branch. Generally, a franchisee who is firmly established in a comfort zone will be unreceptive and want to continue the status quo. Friction grows and becomes a dispute and the second phase of the phenomena kicks in.
A franchisor in that situation would only have a limited number of options, some of which would probably be stated in the franchise agreement. Unfortunately, remedies such as the issuing of breach notices and the ultimate termination of the franchisee would bring as many negatives as they would solutions. A dispute invariably causes disquiet in a network, further disrupts branch performance and negatively impacts customers. A termination would send even worse messages to the other franchisees and would hamper the appointment of a replacement. It would also make franchisee recruitment in virgin territories more difficult because an ethical franchisor should always disclose the number of branch failures to prospective franchisees.
Solutions to the problem will vary, depending on the nature of the franchise and the industry in which it operates. However, one thing is common; it is easier to eliminate or at least minimise at the initial planning stage, before the franchise commences any recruitment.
Areas involved are the mapping of territories, the operations manual and the franchise agreement. Careful consideration should be given in each of these. As is often the case, anticipating and avoiding a problem is much easier than solving it.
Regretably, few if any, franchise consultants offer advice to franchisors about the comfort zone when that are at the planning stage of a new business. Few solicitors pay sufficient attention to it when drafting franchise agreements.
