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How Do You Survive Franchisor Bankruptcy

Written by: Sebastien Page

Article Overview: It takes immense discipline and fortitude to survive a franchisor's bankruptcy. It's a good idea to have a plan to minimize any potential losses in revenue and reputation, just in case such an unfortunate circumstance arises. When armed with a plan, you're more likely to avoid disaster and consequently keep your business afloat.

How Do You Survive Franchisor Bankruptcy

It takes immense discipline and fortitude to survive a franchisor's bankruptcy. It's a good idea to have a plan to minimize any potential losses in revenue and reputation, just in case such an unfortunate circumstance arises. When armed with a plan, you're more likely to avoid disaster and consequently keep your business afloat.

The following are tips designed to help you get through franchisor bankruptcy:

- Heed warning signs: Hear a rumor? Investigate it. You do not want to find out the hard way – i.e., through a third party like a customer or the paper – that the franchisor is bankrupt, since doing so can compromise your rights and interests. If someone murmurs “bankruptcy,” be on the alert. The worst case scenario is that you determine that the rumor is no more than a rumor, and business resumes as usual. Some signs are very subtle, so pay attention. For example, if your franchisor is collecting advertising money from you but you don't see any advertising happening, be on guard.

- Have a crisis communication plan: Make sure you have a public relations campaign that includes a crisis communication strategy – preferably, a strategy that includes several contingencies. For instance, if your franchisor goes bankrupt, the media and customers will be wondering if the business is in jeopardy. You want to be able to craft a quick response.

- Be sure to stay in touch with the local media: True, newspapers and media generally go straight to corporate headquarters for information – but don't let that deter you from establishing your own relationships with writers, reporters, producers, and news directors. This way, you'll be in a better position to field inquiries should disaster strike.

- Keep a list of alternative suppliers: Occasionally the initial problems occur with suppliers who may be nervous about getting paid. Moreover, if the franchisor can't provide supplies, a franchise must look elsewhere. Develop a list of viable and trustworthy suppliers to prepare for a possible distributer catastrophe situation.

- Maintain a stash of supplies: Your franchisor declaring bankruptcy could very well leave you with an inadequate amount of supplies. By keeping a surplus of items you may need, you can avoid this scenario.

- Ensure that the community is aware that you're independently owned: While you don't necessarily need to regularly remind your customers that you're independently owned, you do need to establish your business as a separate entity from all the other franchises. This can be accomplished by either letting fellow business owners know or becoming involved in the community. You want your business to feel as “local” as possible, because customers tend to favor locally owned businesses over nationally owned ones.

- Get the support of fellow franchisees: Moral support from your colleagues – even if they're also your competitors – never hurts. In fact, helping out your fellow franchisees in times of need could ultimately mean the difference between success and failure. If the distance between you and other franchisees isn't too great, you may be able to share supplies, which would help everyone.

- Consult a lawyer specializing in franchising: Consulting an attorney who has expertise in franchising could end up being invaluable in the case that your franchisor goes bankrupt. The time and money you put into hiring an expert is, simply stated, an investment in your future. A lawyer can educate you about your rights and help you concoct the right business plan for your business. You owe yourself this and more as a business owner.

Related Articles
  What You Should Know About Your Franchisor Before Signing On
  Qualities to Look for in a Franchisor
  Evaluate Complaints Against Franchisors Before Signing The Agreement
  When Net Worth Is Important to a Franchisor and How To Overcome It
  The Ten Golden Rules

Article Tags: bankruptcy, communication strategy, contingencies, corporate headquarters, crisis communication plan, discipline, fortitude, franchise, franchisor, heed, initial problems, jeopardy, local media, news directors, producers, public relations campaign, quick response, unfortunate circumstance, warning signs, worst case scenario



Related Forum Posts
re: franchising mistakes - Great list Michele. I would expand on the first point re: due diligence, to call and speak with a number of existing franchisees. In my experience, I am amazed at *some* folks lack of due diligence... It's as if they are set on the concept, and have no desire to hear other opinions. While you may get a list of references from the Franchisor, it wouldn't hurt to call a few franchisees that are not on their approved list. You may be surprised at what you learn. I can think of a handful of franchise offerings (very recognizable brands) that, upon deeper research, would reveal a darker side that would send me - and any other sane entrepreneur - running in the opposite direction. Yet there are people still buying into the franchise concept with a glazed look in their eyes.


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