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Why Some Partnerships Stink and What to do About it

October 7th, 2010


There are basically two types of partnerships: those that stink and those that are great, with those that stink apparently far outnumbering the other. As a result, many franchisors go as far as discouraging franchise candidates from forming partnerships during the recruitment process. “You can do it yourself,” they say. “Why would you ever want a partner?”

Because of the synergy frequently created by great partners’ complementary skill sets, often a committed partnership will outperform franchisees who go it alone. Therefore, Franchise Performance Group is not against all partnerships, just the stinky ones.

The quality of an existing operating franchise partnership is almost always designed to be that way from the beginning. Great partnerships are like the successful married couples who dated for three years before they got married, having survived the tough “How many kids do you want?” premarital conversations. As a result, they enter into matrimony with their eyes wide open and with carefully managed expectations. On the other hand, stinky partnerships are like the couple who met at the airport bar and decided (after a few belts) they were meant to be together and thought it would be a great idea to hop a red-eye to Vegas.

The mistake most franchisors make is they neither take the time nor ask the questions necessary to predict the likelihood of success of the partnership. Prior to awarding any partnership a franchise, the franchisor should probe the key areas below and listen intently on how the partners respond.

Key areas of concern How successful partners usually respond How stinky partners usually respond
Roles and responsibilities Partners have clear roles and delineation of responsibilities. They haven’t thought roles and responsibilities all the way through, but one partner thinks they might be better at sales and the other is familiar with Quickbooks.
Decision-making The have an upfront agreement on a mechanism for budgeting and strategic decision-making One partner got their way last time, now it’s the other’s turn.
Ownership They are clear on who invests what amount, who owns what shares, and if additional capital needs to be raised, what happens to shareholder value. Huh?
Conflict resolution They have a mechanism in place for breaking deadlock in the decision-making process, keeping the business moving forward. Rock-paper-scissors. If that doesn’t work, the one who doesn’t get punched in the mouth makes the decision.
Values Share common leadership and management philosophy. Do business according to the same set of principles. Values schmalues. As long as we’re making money, who cares?
Sharing the benefits They agree up front about what dollars are reinvested and what money gets distributed to whom and in what proportion.

A dollar for me and a dollar for you.

We just invested. Why should we reinvest?

Exit strategy They have negotiated a buyout agreement up front, allowing partners to cash out gracefully should their objectives not be met, while at the same time leaving the business intact. Pistols at 20 paces or running each other down in the parking lot.
Partnership agreement Drafted by an attorney and signed by all parties. Do notes taken on a cocktail napkins count?

If a franchisor doesn’t hear intelligent, well-reasoned responses to the franchisor’s questions regarding these areas of concern during the franchisee recruitment process, they should know up front the partnership is positioned to fail. The franchisor then has a choice to make: 1. Run like the wind or 2. Demand the partners think their partnership through and create a formal partnership agreement addressing the areas above and submitting it to the franchisor for feedback.

Comments(1)

  • Don Welsh
    10/15/2010, 7:38 am  Reply

    Probably, the most interesting issues that arise is that small business partnerships are like marriages…. The partner’s idiosyncrasies tend to become bothersome… ie – one of my partners is always late to meetings and one is always early. I typically schedule the meetings – so I have to tell one its 30 minutes earlier and one its 30 minutes later than the real meeting time. I tend to over communicate and I wear people out. But these small issues in light of the larger goals and opportunities in the context of partnership sometimes tends to become large issues. So, in your article, its important to have a mechanism to be able to articulate these issues against the strengths of the bonds of the partnership where they can be discussed without causing damage. For instance, I apologize to my partners at least once a month for some of my “issues” and the consternation I can cause – since my actions are never intentional or premeditated or meant to cause harm, the apology forms the opportunity for all of the partners to clear the air in the context of reaching the real goals.

    Partnerships can form great opportunities for individuals to work on their warts…. Dictators fall into the traps of yes man and buying into their own dillusions.

    Lastly, in partnerships, it is vitally important for everyone to understand what each individual wants to achieve personally. Ie some on intellectual discussion and mental stimulation (I do to)…. I like to create and make deals…. others like to make money and fix operations (small and large). Each person has to be fed or they literally will die.

    Interesting to me are the people who disavow partnerships – I know a franchisee that will not form them – he says his wife is his only partner. I find these people interesting… they look at partnerships as an a la carte relationship… (I have to take something off of my plate and do without) or they view it as lack of control (pride). In the end, I see these people, when you strip all of the rhetoric away, they want the spotlight.

    However, in all partnerships, it is always apparent (but sometimes not always said) that all partners are not equal. The goal of a partnership should be in my opinion a structure where the best attributes of the individuals gets brought to the forefront to create immense value… and where one of the partners has the attribute of leadership, he/she needs to play that role. In this partnership, the partners cannot get confused that if there talents, purpose, and reasons for being apart of it are being actualized, then they cannot begrudge that the leader is any more or less compensated then them. What is unfortunate is how recognition is metered out – and that is where problems sometimes arise.

    Don Welsh
    Sonic Franchisee (w/Partners)

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