To All Franchisors in Toronto, in Ontario, or Across Canada: Improve the Franchisee-Franchisor Relationship by Establishing a Franchisor Advisory Council

Generally speaking, open, informed communication is essential to the success of the franchisee-franchisor relationship.

In order to develop and promote this communication, some franchisors have instituted franchisor advisory councils (FACs). The main purpose of the FAC is to facilitate franchisee-franchisor communication regarding matters that affect the franchise system as a whole. An FAC allows a franchisor to gather valuable information about changing consumer preferences and market conditions from those who are actually in the business of delivering the system’s goods or services, thereby enhancing its ability to monitor the health of the system. An FAC also permits the franchisor to stay informed about franchisee concerns regarding a wide variety of issues, including royalty payments, marketing strategies and advertising contributions, changes to operating procedures and performance standards, and competition within the industry.

An FAC must have a degree of independence from the franchisor. An FAC should be comprised of motivated franchisor representatives and franchisees representing all levels of operational sophistication and every geographical region. That is, the franchisees selected must reflect the varied conditions and market realities of each of the locations that represent the brand.

For an FAC to function effectively, franchisees need to know that their concerns are being taken seriously. If a franchisor’s representative makes a promise, those promises must be acted on. Furthermore, franchisees must see results. Those who are tasked with carrying out FAC resolutions must be accountable to the council. In addition, franchisee council members must be accountable to the other franchisees in the system. They must also make themselves available to the franchisees they represent to discuss their concerns and to advocate on their behalf at council.

The typical FAC is composed of one or more of the franchisor’s senior executives and a representative group of franchisees. The number of franchisee council members varies. The method of selecting franchisee members also depends on the system.

The FAC’s constitution and bylaws, which govern every aspect of its operations, are drawn up by the franchisor. While there is usually no restriction on the range of issues that an FAC can discuss, the constitution often constrains the authority of a council to deal with certain questions. That is, a franchisor is free to limit the jurisdiction of an FAC to those matters specifically enumerated in the constitution.

The bylaws establish the particular structure of the FAC. Specifically, the bylaws determine how council officers are appointed and removed, procedures for holding meetings, quorum requirements and a variety of other technical matters. Council meetings are normally held quarterly or semi-annually, usually at the franchisor’s head office. The expenses incurred by franchisees to attend to their council duties are often borne by the franchisor. FACs are usually funded entirely by the franchisor.

An FAC can be a vital tool for the operation of every franchise system. A properly functioning FAC is a reflection of the interdependent relationship between the franchisor and its franchisees.

The relationship between a franchisor and its franchisees can be complex. We have the skills and experience to assist franchisors in navigating their relationship with franchisees.

*the foregoing is a condensed version from “FRANCHISEE ASSOCIATIONS IN CANADA” co-authored by David Kornhauser and Michael Kleinman, Carswell, 2011.

By David N. Kornhauser, MBA, LL.B. Mr. Kornhauser is corporate counsel at Macdonald Sager Manis, LLP, in Toronto, Ontario. Mr. Kornhauser’s and Mr. Kleinman’s practice includes representing franchisors, franchisee advisory councils and franchisee associations in all aspects of franchise law. David can be contacted at 416-862-6280 or 855-324-3944 or by e-mail at david@franchisingforum.ca or dkornhauser@msmlaw.ca; Michael can be reached at or by e-mail at michael@franchisingforum.ca or mkleinman@msmlaw.ca

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