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In most businesses, and especially in franchised operations, the relationship between employer and employee is guided by two agreements: the formal contract and the psychological contract.
The formal contract is easy to spot. It outlines job title, compensation, benefits, and hours. But the psychological contract is the real driver of behavior. It is the unspoken set of expectations, assumptions, and obligations that both sides believe to be true.
When those unspoken expectations are made explicit and deliberately aligned, we have what psychologists call mental contracting: the conscious process of identifying, articulating, and agreeing on the mutual expectations between two parties before problems arise.
In a multi-unit franchise, particularly one that is family-operated, this kind of clarity is essential. Generational gaps, family dynamics, and business decisions often collide. And unlike in traditional businesses, the stakes are not just profit or productivity. They are personal, involving your name, your reputation, and your legacy.
Mental contracting goes beyond operations manuals and P&Ls. It involves asking:
In franchise businesses with family involvement, expectations are shaped by lived experience, generational worldview, and even how each person interprets brand loyalty:
These perspectives are all valid. But when expectations remain implicit, they are often misread, leading to frustration, burnout, and stalled transitions.
Studies in family enterprise governance show that most conflict is rooted not in business strategy, but in misaligned perceptions of fairness, contribution, and reward.
Here are some common flashpoints:
In franchise systems, where adherence to brand standards is nonnegotiable, these misalignments can also create tension between family-run units and the broader franchisor relationship.
Mental contracting is about making expectations explicit. It is the opposite of saying, "They know what I mean; we are family." For multi-unit franchisees, the process is most effective when it includes:
In franchising, this distinction helps protect professional accountability and signals to other staff that standards are universal.
Let's say your daughter joins the family franchise operation, fresh from a top-tier business school. She assumes she will be overseeing multi-unit strategy in six months.
You assume she will run one store for two years before anything else.
No one clarifies expectations.
What happens?
The issue is not who is right. The issue is that no one talked about it.
The WOOP model, adapted for multi-unit family franchisees, is a practical way to begin mental contracting:
A fourth-generation family-owned franchise group with 11 retail locations implemented one-page expectation agreements for all family employees. Each document covered:
The results?
Mental contracting is about clarity, not control. For family-run franchises, where personal and professional overlap, it is essential to surface assumptions early. The earlier you align on expectations, the more resilient your business becomes, especially as you scale or plan your exit.
Franchise businesses run on systems for operations, training, and marketing. But when it comes to succession and leadership, too many multi-unit owners are running on assumptions.
Mental contracting offers a way to build your next generation of leaders with intention, transparency, and mutual respect. That's because the hardest part of running a family business is not the operations manual; it is having the conversation you keep putting off.
Dan Schneider, partner and director with Rawls Succession Planners, understands the complexities that come with leading a privately held or family-owned business. Rawls Succession Planners guides owners through leadership transitions, generational planning, and growth strategies to secure lasting legacies. For more information, visit seekingsuccession.com or call 407-578-4455.