When was the last time you visited a Starbucks franchise? You might be surprised to learn that the answer is, “Never.” Starbucks is among the largest chains in the world not to franchise, and CEO Howard Schultz had this to say about why all Starbucks locations are company-owned:
"To me, franchisees are middlemen who would stand between us and our customer… If we had franchised [as some executives wanted to in the 1980s], Starbucks would have lost the common culture that made us strong.”
So, are franchisees really just “middlemen” who get in the way of providing quality service to the customer?
The Value Franchisees (Can) Bring to the Table
I know quite a few people who would disagree with Mr. Schultz’s assessment of the franchise model. Some would even say that it demonstrates a lack of familiarity with the nature of franchising and the franchise relationship. Franchisees are independent business owners, but this does not mean that they have any less interest in seeing their businesses succeed. If anything, their independence provides even more incentive to make sure that they meet, if not exceed, their customers’ expectations.
Mr. Schultz continued:
“We teach baristas not only how to handle the coffee properly but also how to impart to customers out passion for our products. They understand the vision and value system of the company, which is seldom the case when someone else's employees are serving Starbucks coffee.”
Of course, franchisees, like franchisors, rely on their employees to sell their products and services while providing a quality experience. Franchisees also receive training and operational materials from their franchisors. So, franchisors have the ability (and franchisees have the obligation) to make sure that employees at franchised outlets receive the information they need to adequately represent the franchisor’s product line and culture to new and repeat customers. As a result, if a franchisee’s employees are not engaged, there is a decent chance that the franchisor is at least partially to blame.
In addition, it seems unlikely that the identity of the company signing an employee’s paycheck would much influence, if any, on that employee’s willingness and ability to put forth effort on a daily basis.
Franchisor Control and Assistance Are Hallmarks of the Franchise Model
Under the Federal Trade Commission (FTC) Franchise Rule, in order for a business relationship to constitute a franchise, the franchisor must either (i) “exert a significant degree of control over the franchisee's method of operation,” or (ii) “provide significant assistance in the franchisee's method of operation.” If it does neither, the relationship is a license, not a franchise. Most people who buy franchises do so because they want to build a successful business with the help of a proven system and trusted brand. They don’t take these benefits lightly, and they certainly don’t waste their substantial investments by failing to train their employees.
So, are franchisees just “middlemen” who get in the way? As a franchisee, the answer may ultimately be up to you.
Jeffrey M. Goldstein | Franchise Lawyer Serving Franchisees Nationwide
At the Goldstein Law Firm, we represent new and existing franchisees nationwide in evaluating franchise opportunities and protecting their rights in franchise-related disputes. To learn about our flat-fee franchise review services or to schedule a free consultation with attorney Jeffrey M. Goldstein, please inquire online or call (202) 293-3947 today.