Franchise councils: give franchisees a voice from the outset

When your existing business becomes a franchise network, you gain business partners who invest their own money and deal with customers every day. There needs to be a clear route for their experience to inform the network’s development. A franchise council can provide that route, but only if participants know what they can influence, who makes decisions and how suggestions are followed up. Here is a practical model to prepare before signing your first franchise agreement.

1. Define the council’s purpose and limits

Here, a franchise council means a structured forum in which the franchisor and franchisee representatives discuss shared issues. It does not have to be a separate organisation. In a small franchise network, all franchisees can take part in a regular meeting.

Start by setting out its purpose in one sentence: for example, to gather insights from local operations and inform improvements. Avoid broad promises that participants will ‘make decisions together’ if what you actually mean is consultation.

Distinguish between three functions:

• Information: the franchisor explains a situation or a decision already made.
• Consultation: franchisees give their views before the responsible party makes a decision.
• Joint decision-making: the parties have expressly agreed that a particular matter requires joint approval.

An advisory council should not be described as a decision-making body. If you want to give the council genuine decision-making powers, its remit, representation and the legal effect of its decisions will need legal review. A vote at a meeting does not automatically replace consent required under an individual franchise agreement.

Do not let the council become a catch-all channel, either. An individual contractual dispute or an urgent operational problem needs its own point of contact, rather than having to wait for the next council meeting.

2. Set out simple ground rules before recruitment

Sweden has no comprehensive franchise-specific legislation. However, the Act (2006:484) on Franchisors’ Duty to Provide Information applies. It requires franchisors, well before a franchise agreement is concluded, to provide clear, comprehensible written information about what the agreement entails and any other matters necessary in the circumstances.

The Act does not require you to establish a franchise council. But if a say through a council is part of your offer, the description must be accurate and consistent with the terms actually offered. Do not promise a right of veto during recruitment discussions when the agreement only provides an opportunity to express views.

General rules, including the Swedish Contracts Act and Competition Act, are also relevant. Council meetings are therefore not exempt from the rules that apply between independent businesses.

Draw up brief terms of reference answering the following questions:

• Who can take part, and how are representatives selected?
• How long do representatives serve, and how are they replaced?
• Who convenes meetings and receives suggestions?
• Which matters fall within the council’s remit?
• Who records discussions and communicates decisions?
• What confidentiality requirements apply, and what can be shared with other franchisees?

Also decide who pays for travel and other participation costs. Keep things simple to start with, but make the terms known before anyone accepts a role.

3. Ensure representation without silencing smaller units

As the network grows, it may become impractical for everyone to attend every meeting. You will then need a model that does not give a seat only to the largest units or the most vocal individuals.

Consider representation across different types of location, business sizes and levels of experience. A new franchisee will often notice different problems from someone who has run their unit for years. Explain the selection process openly and decide when the model will be reviewed.

Give all franchisees the opportunity to submit questions, even if they do not sit on the council. A simple suggestion template can help:

• What is the problem in day-to-day operations?
• What impact does it have?
• What improvement is proposed?
• Which other units might be affected?

Representatives should be able to raise shared experiences without disclosing sensitive information about individual businesses. Plan the agenda with competition rules in mind. Discussions about future local selling prices, customer allocation or other competitively sensitive matters may be problematic. Ask a lawyer with competition law expertise to review meeting procedures and advise on what information can be shared.

4. Prioritise feedback over the number of meetings

A council only builds trust when participants can see what happens after a meeting. Keep a simple suggestions log recording the issue, the person responsible, the next step and when feedback is due.

In the minutes, distinguish clearly between a view expressed, a recommendation and a decision taken. Also record who made the decision. Otherwise, wording such as ‘the council approved’ can create misunderstandings about both authority and responsibility.

Provide feedback even when a suggestion is rejected. Explain, for example, that the benefit is too limited, that more supporting information is needed or that the proposal falls outside the franchisor’s responsibilities. A reasoned refusal is more useful than silence.

Review the way the council works after the first few meetings. Are issues being raised by several units? Do franchisees who were absent also receive feedback? Do discussions lead to clear next steps? Adjust the format if meetings consist mainly of one-way communication.

Practical takeaway: Prepare brief terms of reference, a suggestion template and a feedback process before promising franchisees a say. An effective franchise council gives the network a voice without blurring each business owner’s responsibilities.