Franchise Blog

An article titled “Owners Say Franchisers Are Passing on More Costs” in the Wall Street Journal today highlights how some franchise companies are asking franchisees to pay for expenses that those franchisees were not supposed to pay in the first place.

Why this sudden way of changing “who pays what”? Well, simply because of the economic situation. What franchisors used to pay for is becoming a real financial burden for them and they don’t want to be responsible for 100% of these costs, which I totally understand and agree with.

Here are a few snippets from the WSJ’s article.

Franchisees of Hollywood Tans LLC, an upscale tanning salon chain, say the company is billing them for maintenance on some equipment they had purchased under warranties that covered servicing charges.

“They’re reclassifying what had been normal wear and tear [and] we now have to pick up” the cost on items such as fans and booth door locks, says Jeff Wogan, who operates a salon in Ranson, W.Va., and is a member of the franchisee owners’ association. He adds that it can take days for someone to show up to fix items, partly because the company’s maintenance crew has been downsized.

These tough economic times are even influencing the training that franchise companies provide:

Training is another contentious area for some franchised systems. “More franchisers are saying, ‘We’ll do it, but only for a fee’ or ‘We’re going to drop that activity,’ ” says Andrew Selden, a franchising attorney at law firm Briggs & Morgan in Minneapolis. “It adds an unexpected cost to the franchisees’ business.” Franchisees in such situations may not realize services they had assumed were contractually promised really were provided at the franchiser’s option, he says.

While I understand that franchise companies want their franchisees to chip in on the various costs associated with the business, I think we may see some lawsuits coming up in the near future. Any comment on this situation is more than welcome. In the meanwhile, hop over to the WSJ to read the full article.

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The International Franchise Association created a website called www.FranchisingVotes.com to help the franchising community register to vote and make it to the polls on Nov. 4.

The site includes access to registration requirements and deadlines for every state, information on federal candidates around the country, voting records of current lawmakers in the 110th Congress and the dos and don’ts of election law.

This website has an educational side as it wants you to learn more about the elections and the candidates by accessing important recourses. In addition, members can learn more about the candidates’ viewpoints on key issues by reading this month’s issue of Franchising World, which includes an exclusive interview where the candidates answered IFA questions.

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I was playing around on YouTube when I came across this video about A All Animal Control. Wildlife in the home or office can do serious structural damage. Animals destroy electrical wiring, phone, cable, computer lines and security systems. Wildlife can also be carriers of disease such as rabies, distemper and many other serious diseases. If you are currently seeking a wildlife franchise, then an exciting career as a A All Animal Control franchise owner could be closer than you think!

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When you’re going into the fiercely competitive world of franchising, you have to understand that you’ll basically be walking into a battleground. There are hundreds just like you everywhere, who could not be happier than when they see you fail. In the world of franchising there are customers to win, market shares to possess and simply the difficult task of standing your ground in the face of all business related difficulties, whether financial or otherwise.

It doesn’t make sense by any stretch of the imagination to enter a battlefield unprepared. You can’t exactly be swinging a dinner knife around when everybody else is swinging a sword now, can you? That’s why you have to remember one of the most important tools to achieving success in a Franchise System which is the proper training. Read more »

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New franchise law blog FranchiseLawyerBlog.com is starting a series of posts about how to develop a franchise system. Although our blog is mostly focused on potential franchise buyers, I thought it would be interesting to see what’s happening on the franchisor’s side. As a potential franchisee, you must know that if sometimes a franchise opportunity is not right for you, you sometimes are not right for the franchise opportunity. Yes, it goes both ways…

There are many individuals running successful small businesses who decide that franchising their concept is the best way to grow. With the assistance of franchise counsel and sometimes business consultants, they develop a business model and create the appropriate franchising documentation; registering their franchise disclosure document (“FDD”) where necessary. At this point they enter into the most crucial phase of franchise development: identifying and attracting the right people to become franchisees of their new systems.

I’m glad to see that some franchisors are really screening out their potential franchisees… not like some other franchises we talked about before…

You may want to read the full blog post here.

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Franchises are always a good bet as they are supposed to be a safer investment than starting your own business. But are franchise opportunities also safer during these tough economic times? The Times New Zealand has an interesting point of view. I invite you to read the full article, but here is a excerpt from it:

IN TOUGH economic times, franchises are a relatively safe way of doing business. This is evident in the 2008 Standard Bank Franchise Factor survey, which showed that only about 3 percent of franchises fail, whereas the percentage of failed start-up businesses is much higher. The survey showed that, between 2006 and 2008, the contribution to GDP by the franchise sector rose to 12.57 percent from 12 percent and the sector created 3600 new businesses.

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Ryan Knoll over at FranchisePundit.com posted a link to an interesting article on Canadian newspaper website TheStar.com about the importance of reviewing the legal documents that are given to you before making the life-changing decision of buying a franchise.

Although the article is for potential franchise buyers in Canada, the rules still apply here in the US. Here is a short snippet:

A franchisor is required to provide it to you at least 14 days before you sign any binding agreement in relation to the franchise or before you pay any monies or deposits to the franchisor or its affiliates in relation to the franchise. This is a key requirement of Ontario’s franchise disclosure legislation, which sets out the details of what needs to be contained in the Disclosure Document.In addition to the main part of the Disclosure Document, the package will include a copy of all agreements that you will be required to sign as part of your purchase of the franchised business, including the franchise agreement.There may likely be some other documents, such as a general security agreement, lease agreement, sublease agreement, and possibly several others.The most important document, though, is the franchise and disclosure agreements.

If you’re considering buying a franchise business, that is a must read! Click here to read the full article.

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As a new franchisee, you have probably been working for months to get to the point of opening your franchise for business. You have undoubtedly put a lot of hard work and money into researching and selecting the best franchise opportunity for you, figuring out how to finance it, being trained by the franchisor, and getting everything up and running. At this point, you might be exhausted from all the time and effort you have put into starting your franchise, or eager to get to the next step of actually running your business. In order to be as successful as possible and get things off the ground, you should orchestrate a grand opening for your store, rather than letting the opportunity of this vital in-between time slip away. A grand opening for your franchise, if done well, increases awareness of your business and can attract customers who may provide you with a lot of business down the road. Read more »

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A potential franchisee should always find out about the history of the franchisor in the territory that they are planning to open their store before entering into a franchising agreement with the company. If the franchisor has previously had a location in the territory that closed or failed for some reason, it will be important to take that into account. A failure by a previous franchisee does not mean that you will fail, but it should give you pause for a variety of reasons.

One thing to examine is whether or not the previous franchisee failed because of a local problem. Perhaps the area you are considering opening your franchise in is not as receptive to the products or services offered by the company as other areas due to regional or demographic differences. Or, perhaps, the local economy is more troubled than most, causing the franchisee to be unable to turn a profit. If you encounter either of these issues with the franchise location, you should seriously reconsider opening your franchise in that territory. You will also probably want to do more research on where and how the company’s stores are most successful before you enter into an agreement with them, as you now know that location can mean the difference between success and failure with their product or service. Read more »

Filed under: Buying a franchise, Franchise Advice, Franchise Articles | 5 Comments »