Nicola Broadhurst, Head of franchising at law firm Stevens & Bolton.
Should dealing with a congested fashion retail market and increasingly demanding consumers not be tough enough, those running fashion retail franchise businesses could be faced with a new threat and one that is unique to the business model.
News from across the pond is that franchisees - the individuals or corporates that run single operations within a wider franchised network - are joining together to take action against franchisors who they think are not acting in the best interests of all.
In both the US and Canada the likes of McDonalds, convenience retailer 7-Eleven and department store chain Sears have all been hit with high-profile franchise class actions. Many UK franchisors are worrying that they may have to deal with similar uprisings.
Disgruntled franchisees may not even need to win a legal case but simply use it as a platform to deliver real reputational damage. With rising importance placed on ethical behaviour, franchisors need to avoid accusations of sharp and avaricious practice at all costs.
It is important to be aware that the UK is a lot less regulated than the US in terms of franchise legislation. This means the franchise agreement is the key starting point to any action. If this has been tightly drafted it can contractually prevent franchisees from engaging in online forums to air their views, an essential first step in preventing damage to the brand. A franchise agreement can also include specific consents that enable franchisors to read franchisees’ emails and edit online sites used by a franchisee.
Perhaps the most important action that can be taken is preventative. In a social industry such as fashion, people need to feel that their opinions are heard. Running regular franchisee forums can help actively manage communications and ensure complaints are aired internally.
If individual franchisees are still not happy then franchisors should not be held to ransom and must take strong action to protect their brands for the benefit of all.