Archive for the ‘Franchise Legals’ Category

Franchising is about teamwork and relationship. In any kind of relationship you will encounter frictions, whether you like it or not. Here’s my view on how to resolve franchise disputes.

Disputes are often inevitable. Franchisors are doing their best in forming a franchise agreement that will work for them and for the franchisees. Franchisees are also doing their best in complying with the agreed franchising terms.

Unfortunately, there will be times that what’s written in the franchise agreement can’t be met by either franchisors or franchisees. Since there are high expectations from both sides toward the franchise agreement, a small mistake can damage the relationship built carefully and with good intentions.…

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You have prepared everything you need to do to buy your dream franchise: Location, check. Market research, check. Financing, check. The due diligence, check, check and check. Now it’s time to move a step forward: Let your franchisor know that you are ready for reviewing and signing a franchise agreement.

Franchise agreement is where things are put at stake – Misinterpret it, and you’ll face the consequences for at least 5 to 10 years.

Franchise agreement can be 50 pages long, even more, and can be overwhelming to read word-by-word, especially if you are not familiar with the jargons and clauses normally used in commercial contracts.…

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Are you eager to find out the ins and outs of franchise legal issues?

Paul Segreto’s franchisEssentials has just announced the debut of its very own ‘Legal Eagle Franchise Series’ on the weekly broadcast of Franchise Today. The Series started on April 29th.

The 4-week series will feature discussions with leading franchise industry legal experts, including:

• Michael Webster, Franchise Attorney and Chairperson of the Strategic Committee of the International Association of Franchisees and Dealers;
• Lane Fisher, Partner at FisherZucker LLC; and a member of the International Franchise Association’s Board of Directors;
• Warren Lee Lewis, Shareholder-Franchising & Licensing at Akerman Senterfitt and Author of The Franchise Seller’s Handbook; and
• Leslie Curran, Franchise Attorney at Plave Koch PLC and Board Member/President-Elect at NAWBO Greater DC.

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Due diligence is the keyword to ensure that everything you have planned in buying a franchise will not go in vain. Proper franchise opportunity analysis can only do you good.

Due diligence is resource-intensive. Doing it requires you to put on your business analyst hat, as well as your skepticism hat.

Unfortunately, choosing NOT to do the business due diligence will bring you problems and perils later on.

A price to pay for not doing business due diligence: I lost my franchise units

You don’t need to prove anything, as I have already proved that not doing my due diligence properly before buying businesses cost me not only one, but two franchise units.…

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New franchises – especially those offering new and in-trend concepts – are always interesting and will likely to attract fans and enthusiasts into franchisees.

New franchises play an important role in franchising: New franchises breathe fresh air to the franchising world, adding value to the wealth of opportunities in franchising worldwide.

Full of potential, new franchises will likely to attract adventurous franchisee candidates to invest in a franchise unit and join the band wagon of ‘the next big thing’ – Some of the new franchises do become the next big thing, indeed.

However, anything that bears the word ‘new’ in the description will always present challenges that is unique to the new franchises alone.…

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I have just read an article from The New York Times that covers the questions you should ask to yourself and a franchisor before deciding on buying the franchise of your dream.

The article opens up some facts that, to tell you the truth, somewhat against franchising, in a sense that you should take great(er) care to invest your money in a franchise opportunities, as many facts and pitches made by the franchise companies are misleading to the ‘untrained eyes.’

I enjoy reading and benefit greatly from the article and would like to share the 9 questions to ask with you.

9 questions you should answer before buying a franchise

1. Who are you?

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We are always ‘reminded’ by various publications on franchising, online and off line, that franchising is expensive, and bailing out from the franchise agreement is costly for the franchisee.

Unfortunately, not many realise that not only franchisees, franchisors are also financially affected by the franchisee-franchisor partnership break-up – And that is just the tip of the iceberg.

Break-up costs to the franchisee

It is obvious that the franchisee will be severely hit by huge monetary loss due to ‘the-usuals’ in the franchise agreement – The non-competing agreement and the right for the franchisor to terminate the franchise agreement almost at will.

The non-competing agreement – Usually, the franchisor requires its franchisees to comply that when the partnership is broken, the ex-franchisees are not allowed to open their own business offering the same or similar products and/or services for a certain period of time.…

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I stumbled on an article on Yahoo! Small Business, that (again) put franchise ownership as one of 7 most overrated businesses.

Kelly K. Spors and Kevin Salwen, the article writers, have conversed with small business experts to identify the overrated businesses. Other than franchise ownership, the other six are: Restaurants, direct sales, online retail, high-end retail, independent consulting and traffic-driven websites.

The culprit that put franchise ownership on the list is, again, the franchise agreement. “…too many people don’t understand the risks associated with franchising and sign restrictive franchise agreements without thoroughly researching their franchisor and their contractual obligations.”

With all due respect – While small business experts can say whatever they want, but I don’t agree that franchise ownership is overrated.…

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You can’t simply please everybody. This fact also applies in franchising.

If you are a franchisor, you can’t simply keep all of your franchisees happy, no matter how well you set the SOP (a.k.a. the “game plan”) and how hard you try to please your franchisees.

The cold hard truth is, “bad” franchisees will nag, whine, and even stab at your back no matter how perfect your franchise is – They simply can’t be pleased.

The truth is even worse if you are a franchisee. Your fellow franchisee that has a bad attitude toward the franchise can also impact your franchise unit.

Why “bad” franchisee is bad for your franchise, whether you are the franchisor or a fellow franchisee?…

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There are always pros and cons in franchising. The pros always believe that strong brand name and proven systems are the main benefits of franchising. The cons always believe that franchising is expensive and unfair (benefit franchisors more than their franchisees.)

I am always pro-franchising. However, I can not deny that there are some legitimate reasons why you should not buy a franchise, if you do not have the proper mindset and knowledge for franchising.

10 reasons not to buy a franchise

According to Nolo.com, there are 10 good reasons not to buy a franchise:

1. Questionable profitability
   Most franchise owners don’t show potential franchisee the whole picture – They use “tricky” but legitimate financial numbers (e.g.

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