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Information and Advice That Matters
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In This Issue Ed Teixeira, Publisher - Carol Moccia, Editor FRANCHISE RELATIONS "RULES TO FOLLOW." Conventions, newsletters, birthday cards, teleconferences, bulletins,
franchise recognition awards, grand opening flowers, CEO visits, franchise
advisory committees,etc. contribute to positive franchise relations but are
ineffective unless resting upon a solid foundation. RULE NUMBER 1: THE FRANCHISE MUST BE A SUCCESS There needs to be a positive relationship between franchisee's earnings and their investment, if the franchise program isn't working fix-it. Accountants are a good resource to use. Use your accounting firm to review the franchisee financial model. Survey and gather franchisee financial results to make sure that your franchise program works. RULE NUMBER 2: DELIVER WHAT YOU PROMISE As franchisor deliver what you promise. Don't raise false expectations in the UFOC, in franchise sales literature or during discovery day visits by prospective franchisees. RULE NUMBER 3: FOCUS ON A SOUND FRANCHISE PROGRAM FIRST Focus on building a sound franchise program first. Some franchisors introduce PR activities and other soft benefits before establishing a solid franchise program. Concentrate on providing services to the new franchisees before tooting your horn. RULE NUMBER 4: FRANCHISE LEADERSHIP MUST UNDERSTAND FRANCHISING Its important that franchisor management understands and is knowledgeable about franchising. The franchisor needs to know what it means to be a "good" franchisor. Prospective franchisees are advised to contact other franchisees. Franchisors should contact successful franchisors in order to gain insight into how they have built successful franchise programs. RULE 5: FRANCHISORS SHOULD HELP A STRUGGLING FRANCHISEE WHO IS DESERVING There is nothing wrong with helping a franchisee that is having problems, but has followed the franchise program. If the effort is there, it makes good business sense to assist these franchisees. Use an action plan to document responsibilities and determine what the problems are. Could the problem be unforeseen market conditions that impact a franchisee? Consider royalty relief with a payback schedule where appropriate. The important point to keep in mind is that assisting a franchisee who is committed to the franchise program is beneficial. RULE NUMBER 6: MEASURE THE RESULTS OF YOUR FRANCHISEES In order to have a sound franchise program, its important to monitor the results of your franchisees performance. A franchisor won't know how well their franchise program is functioning unless they see results. Use surveys, tax returns or franchisee income statements to measure your franchise program. In summary, good franchise relations must be built upon a solid foundation. Franchisees must achieve results that are consistent with their expectations and investment. Without these results the franchisor will encounter obstacles on the road to positive franchise relations. " The public is like a piano. You just have to know what keys to poke." Al Capp HOW FRANCHISEES CAN IMPROVE FRANCHISE RELATIONS "The secret of business is to know something that nobody else knows" Aristotle Onassis WHAT SETS LEADERS AHEAD OF THE PACK " Wise are those who learn that the bottom line doesn't always have to be their top priority" William A. Ward
Click here to read the article FKH INTERVIEW: HAROLD KESTENBAUM, FRANCHISE ATTORNEY HK: Many more woman are involved in franchising today versus years ago. Also, government regulations have become more rigid and franchising is more carefully scrutinized by government officials. Another major change has been the increase in international franchising. Twenty years ago bringing a franchise to Canada was considered a significant move. Now franchising has reached everywhere. Also, a number of countries have attempted to duplicate the United States franchise model in terms of structure and regulations. FKH:What about other changes? HK:The Internet has had a dramatic influence on the way franchises are marketed. One example is the impact on franchise trade shows. Years ago there were more franchise shows compared to today. FKH: What advice would you offer new franchisors? HK: Be sure to be well capitalized. Many good franchise concepts fail because of a lack of capital. Also, franchise candidates are more sophisticated versus years ago. They have access to more information and advice, and that includes evaluating the financial capability of a franchisor. FKH: What advice would you offer a prospective franchisee? HK: Use a franchise attorney to review the franchise agreement. Don't rely on a general practice attorney. Consider having an accountant review a franchisor's balance sheet. FKH: There are some impending changes in terms of franchise disclosure scheduled to take place in the near future. Will these changes affect franchising ? HK: Probably the most significant change will be that a franchisor can provide cost information to a prospective franchisee without it being considered an earnings claim. Harold, thanks very much for your comments. Harold Kestenbaum can be reached at 516-227-0700 or hkestenbaum@farrellfritz.com " The toughest thing about success is that you've got to keep on being a success." Irving Berlin START-UP YOUR FRANCHISE THE RIGHT WAY I've always taken the position that franchise operations represents the real nuts and bolts of franchising. Constructing a franchise agreement without having the experience or expert advice about selling franchises can be a mistake. Not knowing how prospective franchisees think, react and deal with specific issues can be a disadvantage when drawing up the basic terms of a franchise agreement. With all due respect to my colleagues in the legal profession I don't know of any who have sold franchises. The important point to be made is that there is a lot more to franchising than being equipped with a franchise agreement and a manual. Its knowing how to prospect franchise candidates, where to advertise, how to negotiate certain terms of the franchise agreement and how to set the right level of expectations for a franchise prospect. My suggestion to the new franchisee is to learn about about franchising in-depth before putting your program together. Consider engaging the services of a highly skilled and experienced franchise advisor or consultant before having your UFOC done. Spending 1-2 full days with a franchise expert and focusing on franchise operations and the various aspects of franchising can be in-valuable. After you've done this you'll be better equipped to construct your franchise documents and have your operations manual done. " Informed decision making comes from a long tradition of guessing and then blaming others for inadequte results." Scott Adams
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