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WTF?! (Why That Franchise?!)

Posted by Elizabeth Gore-Jones on 11 February 2016

Franchisors, how do you make your franchise system stand out in a sea of franchises?

Slick marketing? certainly helps

smooth sales team? sure

More promises than an election campaign? risky, but not unheard of

So, once you get the franchisees to this point, how do you take them to the next step to actually proceed with the franchise?

As we act on behalf of both franchisees and franchisors, I thought I might enlighten you to what happens when the franchisee sees a franchise lawyer.

In no particular order, we tell them to:

1. forget the sales campaign and to really consider if the franchise is going to work for them;

2. call as many current franchisees as possible.  This is crucial.  Ask the current franchisees things such as:

  • are you happy?
  • are the franchisor and its staff easy to deal with and supportive?
  • do the franchisor and its support staff respond quickly and meaningfully to requests for support and assistance?
  • are you making enough money?
  • are the reporting requirements reasonably or do you spend half of your life compiling reports for the franchisor?
  • do you have work life balance?
  • would you do it again?
  • anything else that is important to the prospective franchisee in deciding to enter into the franchise relationship.

3. call as many past franchisees as possible.  Their details should be in the disclosure document. Ask them similar questions to those you ask the current franchisees but of course the big questions "Why did you leave the franchise???"

4. do your research into the head people at the franchise.  Have they moved around a lot?  what is their past?  are they dedicated/passionate about this business?  What is their reputation?  The Internet is a valuable tool to dig around.

Word of Advice: Read your franchise agreement!!!!

You would be surprised about how many franchisees are put off by a badly drafted and archaic franchise agreements.  Sure, franchise agreements are generally skewed in favour of the franchisor but some of them are downright draconian.  This is very off-putting for franchisees.  Franchisees generally accept that the franchise agreement will be in the franchisor's favour, say it nicely.

Some franchise agreements are so poorly drafted that it seems as though they are a cut and paste job from a number of other agreements and they just don't work.  This reflects poorly on your franchise system,  Franchisees often ask if you can't even get the franchise agreement right then what else have you skimped on?  How well is the franchise system run if the franchise agreement is not reflective of the franchise system?

Take Home Message

Ensure your documents are reflective of your franchise system and continue a positive reflection of a professional organisation without the need to scare franchisees off with overly draconian provisions and remember that franchisees will not base their decision on what you or your team have represented to them.

It is a good thing if a franchisee gets meaningful legal advice and undertakes due diligence, this can help to avoid conflict with franchisees during the franchise term as the franchisee:

(a) enters the agreement with his or her eyes wide open;

(b) understands his or her rights and obligations under the agreement; and

(c) understands what the franchisor is and is not required to provide to the franchisee.

Disclaimer: This information is not to be relied upon as legal advice.  You should seek legal advice applicable to your own circumstances.

Author: Elizabeth Gore-Jones
About: Elizabeth specialises in franchising law. She lectures at Bond University PLA in franchising, she sits on the Queensland Law Society Franchising Committee, she is a past member of the Women in Franchising committee and a past member of the Franchise Council of Australia.
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Tags: Franchisee Franchisor

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