To rule is to look into the future

Supply and demand. Concepts that dominate the entire commercial world. The demand side in particular is the subject of countless writings, the final conclusion of which is often that the emergence of a certain demand, particularly at the consumer level, does not always follow a logical course and often takes place along whimsical emotional lines. A good retail organization, and therefore also a franchise organization, has the ability to recognize those feelings that live among the public in good time and to do something with them in order to adjust its offer to that evolving demand. So far, of course, nothing new has been said, lesson 1 general economics.

However, the above also has a legal framework, in particular when it comes to cooperation on a franchise basis. One of the primary drivers for most franchisees to join a franchise organization is that the “working” of the market, and thus the matching of supply with demand as described above, need not be done by themselves, but that they have a franchisor for this, who identifies trends, adjusts its purchasing policy accordingly and generally ‘has a feel’ for market developments. If all this is the case, then we can rightly speak of a proven success formula and the franchisor thus has a marketing weapon in its hands that it can rightfully “sell” to its franchisees, who pay a certain franchise fee to the franchisor for this. The franchisee, as it were, “buys” expertise from his franchisor in order to benefit himself. In that context, the franchisee may therefore expect his franchisor to meet the conditions described above. In concrete terms, this means, once again, closely monitoring developments on the demand side, a flexible purchasing policy, constant adjustments to appearance and range and a dynamic pricing policy, whereby the franchisee must of course, also from a competition point of view, have a certain freedom to set his own to determine the selling price. Then there can be the proverbial “win-win situation” and everyone is satisfied.

However, the practice sometimes turns out to be a bit more unruly than the ideal image. Starting franchise organizations can miss the mark and be just off the mark when it comes to developments in the market. Franchise organizations that have existed for a longer period of time can lose momentum in their market approach at some point due to a multitude of factors. One of the most important factors in this context is setting up and maintaining a good team of franchise managers, who know what is going on among the franchisees, closely follow market developments and report on this in an insightful manner to the franchisor himself. If that does not happen, a franchise organization can quickly degenerate into a static entity, which the consumer says goodbye to en masse. A franchisee can then rightfully state that his franchisor no longer supplies what he pays a fee for. In other words, this can result in an attributable failure to comply with the franchise agreement, possibly followed by dissolution proceedings and discussions about compensation.
Ergo, however far apart the concepts of marketing and legal may be, there are indeed great commonalities between the two, especially when working together on a franchise basis. A constantly dynamic marketing policy can therefore prevent many problems.

Ludwig & Van Dam franchise attorneys, franchise legal advice

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