The short answer is yes, a franchise owner can be “fired” by the franchisors. However, there is more to it than simply being fired from a regular job, and more factors to consider. In our informative guide below, we’re going to explain everything you need to know about how a franchise owner can be fired, including the various reasons that such an action might happen.
Buying a franchise can be a great way to start a business successfully. When you’re starting your own business, it’s much easier for it to fail since you don’t already have a brand and a customer base to build from. However, when you set up a franchise with the permission and help of a franchisor, you’re going to be starting with a brand name and product that already has a reputation.
With that being said, owning a franchise isn’t always going to be a simple job. There are always going to be setbacks and failures amidst all of the successes and positive business, and in the down moments it’s going to be important who is to blame for the failures. Sometimes it will be the franchise owner themselves.
As we suggested in the intro, a franchise owner can indeed be fired from their position. As you might expect, this is carried out by the franchisors, who have ultimate control. The reasons for firing a franchise owner can be many fold, and we’ll cover them all in a moment, but the ultimate firing will be based on a default from the Franchise Agreement that is signed when the franchise starts.
What Reasons Can a Franchise Owner Be Fired for?
There are plenty of reasons that a franchisor might choose to cease their relationship with a franchise owner. Some of them are quite obvious reasons, which you might expect at most jobs, but others are more specific to the business of franchise owning.
1. Financial Issues
A key reason for a franchise owner to be fired is various financial issues. Money is key when it comes to franchises, and a franchise owner is expected to ensure that their franchise has a specific level of working capital, which is the money available to meet the franchise’s short-term obligations.
Working capital is especially needed in physical franchise stores, because these places are more prone to unexpected setbacks and losses, such as damage to the brick and mortar store, extreme weather (like flooding), and even fires. When these setbacks happen to a physical franchise location, they need enough working capital to stay in business while they’re not doing as much custom as usual.
If they don’t have that extra level of finance for situations like these, then the franchise owner is likely going to be the one who is blamed.
2. A Lack Of Effort
A franchise owner needs to throw themselves into their business. A lot of the business’ success relies upon them, especially in the sense that the staff need to be guided properly, and a franchise owner who puts in a lack of effort with their franchise could be liable for a firing.
This means that franchise owners need to follow the correct paths of business, as set out by the franchisor. For example, they need to follow the marketing plan and make sure that their store is a proper representation of the franchise company. If they let standards slip, it’ll reflect badly on the franchisor, and they might fire them.
3. Missed Royalty Fees
Franchises need to pay royalty fees to their franchisor, because they’re ultimately making money from the pre-existing brand. If the franchise doesn’t pay these fees, or falls behind on the payments, then the franchisor isn’t going to be happy and could “fire” the franchise owner.
4. Not Being Qualified
Of course, it is absolutely essential that a franchise owner is qualified to run their franchise. Not everybody can do something as demanding as running a franchise, where you have to stay on top of the business, understand every aspect that is going on, guide the employees, and much more.
Only people with the correct skills and experience will be able to successfully run a franchise. If a franchise owner isn’t qualified, then it could be cause for the franchisors to fire them. A franchise owner needs to display proper leadership skills, be able to build relationships with all of their staff, juggle all the various stresses and roles of the job, communicate effectively and clearly, and much more.
If a franchise owner isn’t up to the task and doesn’t have these skills, they’re not going to be qualified to run the franchise successfully or properly. As a result, the franchisor will likely fire them, because otherwise they’re a risk to the business.
If a franchise owner is deceitful and acts dishonestly, then the franchise owners are not going to want them running any aspect of their business, so will surely fire them. This is because they can’t afford to have anything that represents their company being run with by somebody who is untrustworthy – it could lose them money and ruin their name.
Obviously, there are lots of ways that a franchise owner can be deceitful and lose the trust of their franchisor. For example, they might be deliberately doing things that the franchisor has explicitly said not to do, like deliberately following sales tactics that they’ve been told not to.
Alternatively, they could be stealing from the business of misrepresenting their earnings. They could also be mistreating employees or underpaying them just to line their own pockets. Whatever the cause, a dishonest action will outline a franchise owner to a franchisor as somebody who cannot be trusted. Nobody wants that in a business, so the franchise owner will be promptly fired.
6. Not Following The Franchise
Another reason for a franchise owner being fired is if they’re not following the whole franchise and the model that they have set out. Franchises have succeeded because they have experience and they’ve developed a structure that is clearly profitable.
If a franchise owner doesn’t run their franchise by following the same model, then they’re not going to succeed as well. On top of that, it’ll drag down the entire franchise as a whole, because one of its stores will appear independent of the overall franchise vision.
Unity is important to the appearance of a franchise company. Imagine if you went to an outlet of a popular fast food chain, but the interior design scheme was different and the menu offered completely different food. It simply wouldn’t be a proper representation of the franchise anymore, and as a result the franchise owner would probably be fired.
How Can a Franchise Owner Keep Their Job?
If a franchise owner wants to avoid the risks of being fired by their franchisor, then they should familiarize themselves with all of the above reasons and make sure that they’re never slipping into any of them. Be honest, transparent, and hardworking.
A franchise owner can be fired by the franchisor for a number of reasons – use our guide to understand them.