Buying Into a New Franchise System
Buying Into a New Franchise System
The First Cab Off The Rank
If everyone listened to the advice of their solicitor or accountant about the risks of being the very first, or one of the first few franchisees into a new Franchise System, no new franchise concept would ever get off the ground.
Undoubtedly, there are more risks in being the “trail-blazer” and investing your hard earned dollars into someone else’s dream. However, like almost everything in life, there are both positives and negatives in being the first into a new system and, for many people who have an optimistic and adventurous attitude, the rewards can be quite significant.
An expression that is rarely used in Legal and Accountancy circles is “Commercial Reality”. A franchise agreement is riddled with obligations for both the Franchisor and Franchisee to meet with Non-compliance triggering a sequence of events that can culminate in termination but “Commercial Reality” is not, and cannot be, written in such documents.
Many solicitors will frighten the living daylights from a client by telling them, “Do you realise that, according to this agreement, if you don’t wear the company hat the Franchisor can put you in breach of your franchise agreement and you could lose your business?” And the solicitors are probably correct, according to the legal implications, but what about “Commercial Reality”.
The most powerful word in the English language is “WHY”. Why would the Franchisor want to close down your franchise? Why would he want to have you listed in the disclosure document as a termination? Why would he want to spend $30,000 – $40,000 in legal fees to take you to court simply because you didn’t wear your hat?
The Franchisor, we hope, is not stupid. If it was an oversight and you had left your hat at home – so be it. If you are a regular offender, the Franchisor would want to know why you refuse to wear it. He will explain that franchising is about standardisation and you must wear your hat as it breaches both health and safety regulations, as well as the franchise agreement.
If you still do not comply, he has two options:
Option 1: The tough stance
a. He sends you a series of breach letters to rectify the problem,
b. He suggests that you sell your franchise to someone with more common sense than yourself, who understands Intellectual Property and branding and, lastly
c. He puts you in the hands of his lawyer and makes an example of you.
Option 2: “Commercial Reality”
a. He finds a hat that you don’t mind wearing,
b. He gives you an exemption for some reason, or
c. He simply turns a blind eye.
99% would opt for the “Commercial Reality”, option 2.
So, what has this to do with being the first Franchise into a new system?
Firstly, you have to understand how much money, time, effort and personal commitment the Franchisor has invested to get his concept to the position where he is ready to offer you a Franchise. In many instances, we could be looking in the hundreds of thousands of dollars with two, three or more years of development.
If you accept the challenge and proceed with the offer and you fail, the last few years of effort and a future full of dreams and goals evaporate, like the morning dew, for the Franchisor. He needs you to succeed. He will do everything in his power to make you successful. His gratitude to you should be unbounded.
This is “COMMERCIAL REALITY”.
Buying Into a New Franchise System - To learn more about this author, visit Colin Mackie's Website.
Like this article? Share it with your friends
Buying Into A New Franchise System
The First Cab Off The Rank
If everyone listened to the advice of their solicitor or accountant about the risks of being the very first, or one of the first few franchisees into a new Franchise System, no new franchise concept would ever get off the ground.
Undoubtedly, there are more risks in being the “trail-blazer” and investing your hard earned dollars into someone else’s dream. However, like almost everything in life, there are both positives and negatives in being the first into a new system and, for many people who have an optimistic and adventurous attitude, the rewards can be quite significant.
An expression that is rarely used in Legal and Accountancy circles is “Commercial Reality”. A franchise agreement is riddled with obligations for both the Franchisor and Franchisee to meet with Non-compliance triggering a sequence of events that can culminate in termination but “Commercial Reality” is not, and cannot be, written in such documents.
Many solicitors will frighten the living daylights from a client by telling them, “Do you realise that, according to this agreement, if you don’t wear the company hat the Franchisor can put you in breach of your franchise agreement and you could lose your business?” And the solicitors are probably correct, according to the legal implications, but what about “Commercial Reality”.
The most powerful word in the English language is “WHY”. Why would the Franchisor want to close down your franchise? Why would he want to have you listed in the disclosure document as a termination? Why would he want to spend $30,000 – $40,000 in legal fees to take you to court simply because you didn’t wear your hat?
The Franchisor, we hope, is not stupid. If it was an oversight and you had left your hat at home – so be it. If you are a regular offender, the Franchisor would want to know why you refuse to wear it. He will explain that franchising is about standardisation and you must wear your hat as it breaches both health and safety regulations, as well as the franchise agreement.
If you still do not comply, he has two options:
Option 1: The tough stance
a. He sends you a series of breach letters to rectify the problem,
b. He suggests that you sell your franchise to someone with more common sense than yourself, who understands Intellectual Property and branding and, lastly
c. He puts you in the hands of his lawyer and makes an example of you.
Option 2: “Commercial Reality”
a. He finds a hat that you don’t mind wearing,
b. He gives you an exemption for some reason, or
c. He simply turns a blind eye.
99% would opt for the “Commercial Reality”, option 2.
So, what has this to do with being the first Franchise into a new system?
Firstly, you have to understand how much money, time, effort and personal commitment the Franchisor has invested to get his concept to the position where he is ready to offer you a Franchise. In many instances, we could be looking in the hundreds of thousands of dollars with two, three or more years of development.
If you accept the challenge and proceed with the offer and you fail, the last few years of effort and a future full of dreams and goals evaporate, like the morning dew, for the Franchisor. He needs you to succeed. He will do everything in his power to make you successful. His gratitude to you should be unbounded.
This is “COMMERCIAL REALITY”.
Buying Into a New Franchise System - To learn more about this author, visit Colin Mackie's Website.
Like this article? Share it with your friends
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Staging DivaDebra Gould, aka The Staging Diva®, is President of Six Elements Inc., an internationally recognized home staging company. Inspired by many requests from aspiring home stagers wanting to start similar businesses, Gould created the Staging Diva Home Staging Business Training Program. Gould has trained over 1000 Staging Diva Graduates worldwide to start staging businesses. Buying decorating and selling six of her own homes in four years lead to an interest in real estate staging which she turned into a career with the launch of sixelements.com in 2002. Since then she has staged hundreds of homes in addition to teaching home staging training. Gould is the author of several home staging resources including a series of popular ebooks made up of a Design Guide, Color Guide and Portfolio Guide. For more information about Debra Gould visit stagingdiva.com. - Visit Staging Diva's Website |
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 Colin Mackie (Visit Colin's Website) Colin Mackie has had over 20 years of experience in the franchise sector within Australia and has acheived a number of records that still hold today in this area of business. Colin's main expertise is in the area of franchise development where his comapny will assemble all of the required documents after a fair, equitable and viable franchise concept has been investigated and accepted as the best form of franchise system for a particular business of industry type. His personal business experience is exceptional and covers such a wide area of business types that his knowledge is often seen as unequaled by many of his associates. One area where his company excells is in the area of Franchisee Selection. Colin feels that you should never 'sell' a franchise, but select people who, after investigation, will have an above average potential for success. Colin and Enterpise 21 have also developed a system of personal development that is essential in getting the attitude of Franchisees and staff into a place where sucess will be acheived much more easily and with a much more positive attitude. Colin is available for events and workshops by request.
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