Comments on: 4 Great Tips (And 1 Bad One) on Buying a Franchise

By: franchise tips

franchise tips — Thu, 10 Jan 2008 11:26:36 +0000

I could just watch the show because I am yet to play the Franchise game. Any how this looks fair.

By: Joel Libava

Joel Libava — Sat, 20 Oct 2007 14:28:07 +0000

Thanx, Sean..
Maybe my comment was put more clearly than yours, but the point is, and I know you agree…The Franchisor has the power..contract wise.
More and more franchisee associations are springing up, which will help the franchisees, but a contract is a contract.
Joel Libava from “The Rock and Roll Capital of The World”
Go Indians!

By: sean

sean — Fri, 19 Oct 2007 19:00:57 +0000

Joel makes the point more clearly than I did… When I was part of management of a growing franchise concept, a prospect wanting to make substantive changes to the agreement was a red flag that this might not be a good franchisee. If they wanted to make changes now, would they comply with required operational procedures and standards, etc. or would they be tinkering with the recipe? We had put together a program that worked for both sides, and were looking for those who wanted to duplicate – not tinker with – the system.
Of course, this was a very good franchisor. I think it’s a matter of degree. But Joel makes an important point: find a system you believe in AS IS, and a franchisor that knows the business and demonstrates commitment to growing unit level sales (not just franchise sales). Once you’re on board, follow the system and listen to the advice you paid for.

By: Joel Libava

Joel Libava — Fri, 19 Oct 2007 17:35:13 +0000

Sean and Rush,
Franchise agreements of course are Franchisor friendly. When I do seminars, I always strongly remind future franchise owners that the franchise concept they may be interested is NOT THEIR CONCEPT. If they were the Franchisor, they would get to choose the royalty percentages, the territory sizes etc. If one is not willing to invent the system, invest the proper amount of money that it takes to BE a successful A FRANCHISE COMPANY {a LOT!} , then they do not get to make the rules, including the franchise contract.
Not negotiable, as it shouldn’t be.
Joel Libava
The Franchise King Blog
Fan of Sean’s

By: sean

sean — Fri, 19 Oct 2007 05:32:05 +0000

Rush:
Welcome to FranchisePick! As a fellow Midwesterner, Iowa-esque is certainly a compliment.
Actually, my disagreement with the negotiation point was with it being so absolute: if they have a policy of not negotiating the contract, run in all cases. That doesn’t take into account whether it was a fair agreement to begin with, or which changes are being requested. Also, non-negotiation doesn’t necessarily mean inflexibility. A franchise consulting firm I worked for taught new franchisors not to negotiate substantive elements of the contract. They wouldn’t negotiate important elements because that’s what they were taught. Things like territory boundaries, or the example you cite, would be fine to negotiate.
You’re right… I came back absolute the other direction. I think he’d be better off advising to walk away if you don’t get a sense that the FR is genuinely interested in the franchisees’ success.
I’d suggest that an additional issue for potential franchisees is the franchisor’s long term involvement. One may buy a franchise from the loveable Ben & Jerry, but end up answering to Unilever. MBE franchisees ended up being strongarmed to convert when UPS bought them, then ended up having to compete with their own franchisor.
It’s a tough biz, but thanks to blogs there’s lots of good advice and info to be found. I encourage FP readers to check out the growing legal resource at http://www.rushonbusiness.com.

By: Rush Nigut

Rush Nigut — Fri, 19 Oct 2007 02:46:30 +0000

Thanks for the link and the kind words. (Iowa-esque is kind, right?). I understand your position regarding negotiation on behalf of franchisees. From a franchisor perspective it makes sense to have uniform agreements and programs. But I am sure you would agree there are two sides to each franchise agreement. Franchisees have their own goals and needs when they enter into a franchise agreement. The point is that if a franchisor will not consider the goals and needs of the individual franchisee – how good of a business partner will the franchisor end up being? In other words, why not a win-win approach rather than a take-it-or-leave-it-approach? Fortunately many franchisors understand win-win is the better approach.

I don’t pretend to speak for Ron Gardner but the context was not as you described. Naturally you have to give to get (something else Gardner discussed). A franchisor is unlikely to substantially rewrite an agreement? The franchisee must be prepared to make concessions. But usually there are two to three points which are worth talking about that may help the individual circumstances of the franchisee without throwing the whole franchise system into disarray. Maybe you have overreacted to the point?

Do you really believe that every franchisee has exactly the same wants, needs and goals as every other franchisee? Let me give you an example:

A prospective franchisee client I represented was considering a franchise opportunity. At the same time he also knew he planned on buying a second, unrelated franchise so his son could operate that particular franchise. The franchise agreement prohibited the franchisee from soliciting clients after the franchise agreement ended – no exceptions. The franchisee planned on marketing the second franchise to his clients in the first franchise. If the franchisor had not negotiated the language he could not have done this and the franchisor would have lost the prospective franchisee. The franchisor did change the language and it was a win-win. The franchisee got what he wanted and the franchisor got the sale without any harm to its system. Under your theory, the franchisor would not have negotiated and both would have gone their separate ways. It is dangerous to take the one-size fits all approach.

Rush

By: 4 Great Tips (And 1 Bad One) on Buying a Franchise at PIGASYS

4 Great Tips (And 1 Bad One) on Buying a Franchise at PIGASYS — Thu, 18 Oct 2007 18:48:04 +0000

[...] Share This [...]