Customer complaints in franchising: allocating responsibility properly

When your business becomes a franchise network, customers encounter the same brand but may buy from different independent businesses. You therefore need to decide how complaints will be handled before your first franchisee opens. A consistent customer experience depends on clarity about who the seller is, who can make decisions and how costs are shared. Otherwise, customers risk being passed between businesses, each referring them to the other.

1. Start by identifying who the customer’s contract is with

Franchising is based on cooperation between independent businesses within a network. Having your brand above the door does not, in itself, mean that your business is the contracting party in every customer purchase. Start with how sales actually work, rather than how you would like to allocate responsibility internally.

Map out each sales channel: purchases on the premises, orders through a shared website, telephone bookings and any subscriptions. Document which business enters into the contract with the customer and how the customer is informed. Check that business details, terms of sale, order confirmations and receipts all present a consistent picture.

A shared website needs particular attention. If customers order centrally but receive the goods or services locally, the respective roles of the franchisor and franchisee must be clear. Who takes payment is an important detail, but the assessment should cover the entire purchasing process and the contractual terms.

Create a simple table with the following columns:

• sales channel and type of purchase,
• business with which the customer contracts,
• first point of contact for complaints,
• party responsible for investigating and making decisions,
• party responsible for refunds or other remedies.

Have a lawyer review arrangements in which several businesses are involved in the same purchase.

2. Separate customers’ rights from your internal agreement

Sweden has no comprehensive franchise law, but the Franchisors’ Disclosure Obligations Act (2006:484) governs the information that must be provided before a franchise agreement is signed. The franchisor must provide clear, written information well in advance about what the agreement entails and any other matters necessary in the circumstances.

If your complaints-handling model imposes financial obligations on the franchisee, these need to be clearly described in the contractual documentation and addressed in the pre-contractual disclosures. Examples include an obligation to handle complaints relating to other outlets or to contribute towards the cost of shared customer commitments. The disclosure legislation does not, however, determine the customer’s right to a remedy.

Sales to consumers are subject, among other legislation, to the Swedish Consumer Sales Act for goods and the Swedish Consumer Services Act for services falling within its scope. For distance sales, the Swedish Act on Distance Contracts and Off-Premises Contracts may also apply. Not all services are covered by the Consumer Services Act, so check the rules applicable to your particular offering.

The franchise agreement can allocate costs and tasks between the businesses, but it cannot restrict consumers’ mandatory statutory rights. You should also distinguish complaints about faults from the right to withdraw from a purchase, voluntary returns policies and guarantees. These apply under different conditions and should not be treated as the same type of case.

3. Agree decision-making authority and reimbursement before problems arise

An effective procedure needs to specify who is authorised to do what. If every minor case requires the franchisor’s approval, the process will be slow. If each outlet promises different solutions, the customer experience will be inconsistent.

Define which decisions franchisees can make themselves and when central support is needed. Escalation may be appropriate for recurring product defects, personal injury, suspected safety risks or a fault affecting several outlets. Serious safety issues need a separate, urgent response.

Keep two decisions separate: what remedy the customer is entitled to, and which business will ultimately bear the cost. Internal discussions about costs should not delay customers’ access to their statutory remedies.

Make specific provision for cases where a different outlet receives the complaint. Should it simply log the case, or also inspect the goods and provide a remedy? Specify how labour, materials, transport and refunds will be reimbursed, and what supporting documentation is required.

If you tell customers they can raise a complaint at any outlet, that promise must work in practice. Do not introduce a generous marketing promise until the participating businesses have clear obligations, effective systems and an agreed allocation of costs.

4. Test the entire process before the first opening

Use a practical test case: a customer buys a product through the shared website, collects it from one franchisee and reports a fault to another. Follow the case from initial contact through to resolution.

Check whether staff can identify the seller, find the purchase details and explain the next steps without the customer having to untangle the franchise agreement. Also test what happens if the person responsible is absent or the businesses disagree about the cost.

Record only the personal data needed for the case. Establish access permissions, storage arrangements and responsibilities in line with data protection rules, particularly where several independent businesses use the same case management system.

Finally, appoint someone to gather lessons learnt and identify recurring faults. Practical takeaway: make it easy for customers to get in touch, clarify the seller’s responsibilities and put your internal cost-sharing arrangements in writing before bringing your first franchisee on board.