'From working together to undertaking together'

Increasingly, we see that a franchisor holds shares in the franchisee's business, co-invests, or co-operates. Whether and to what extent participation is useful depends on the situation and the franchise formula. Participating with shares can be done in different ways. For example, with a minority shareholding by the franchisor without being entitled to profit, or through a joint venture where operations are conducted jointly. By the franchisor participating in the franchisee's business, the franchisor and franchisee become more closely bonded. It is less non-committal and gives the franchisor more influence. Initially, this may feel somewhat unfamiliar to some franchisees and franchisors. After all, franchising is based on the independent entrepreneurship of the franchisee. But let's consider the advantages of the participation model.

• The participation model, due to the closer connection between participants, ensures more agility. Nowadays, formulas must be able to switch quickly and manage quality optimally. If this does not happen, the formula loses its competitive strength and, thereby, its added value for the entrepreneurs.
• When there is financial participation and the franchisor is also profit-entitled, the financial interests of the franchisee and franchisor align more. Moreover, franchise businesses can often be more easily financed by banks.
• In addition to the contractual relationship, a corporate relationship arises. Through the franchise agreement, the shareholders' agreement, and statutes, the participation model provides more clarity in advance on the departure of the entrepreneur or transfer of the business (share offering obligations, goodwill provisions).
• In some cases (especially with a relatively low investment by the entrepreneur), shorter durations or more flexible cooperation contracts are possible. Hence, provided it is well-documented, it will be easier to part ways if one or both parties wish to do so.
• Finally, concerning the franchisee's individual entrepreneurship: the degree to which this is realized within a formula is not so much dependent on the franchisor's participation. It is more about how agreements are documented with room for the franchisee, how entrepreneurs are selected, and how cooperation is practically conducted.

The participation model demands high standards of cooperation and is even less non-committal for both franchisee and franchisor. It imposes specific requirements on transparency and information exchange. However, the Dutch franchise sector can benefit from it. Therefore, the participation model can be an important incentive for franchising.