Franchise Agreements The Basics
Franchise Agreements The Basics
What you need to look for when you want to start a franchise and are ready to sign the franchise agreement.
So you’ve taken all the appropriate steps; you’ve researched, asked questions, found out about the competition, scouted locations and lined everything up. Now it’s time to sit down and sign the franchise agreement. But before you do, there are several things you need to know. The franchise agreement will be the bedrock of your business, and success (or failure) may lie somewhere inside all those conditions and terms. A smart franchisee will read the franchise agreement very carefully, making sure they understand everything within it. Here are some of the most commonly misunderstood or potential problematic areas you need to be aware of:
1. Be sure negotiation is available. Some franchising agreements can be discussed, changed or amended, while others cannot. Make sure you know where your franchiser stands. It’s quite common for some clauses to be non-negotiable, while others are open to discussion. If you want to alter your franchising agreement, make sure you know what you want to change before you start negotiating.
2. Know what you can or cannot sell. Sometimes it will be very clear what you can or cannot sell through your franchise. Other times, however, it may not be. Make sure you understand exactly what kind of business transactions you are allowed to sell, what you are not allowed to sell and what isn’t mentioned. If something is unclear, you’ll want to get some clarification before you commit your signature to paper.
3. Marketing is vital. Franchisers want to see the franchisee succeed, but in their eagerness they may require you to sustain a marketing budget that is too high. If your agreement calls for a specific marketing budget, you may want to alter it so you have some more leeway. In the early years of a business, too much advertising can kill your cash flow, and being beholden to a set marketing strategy can cause difficulties.
4. Watch for default. Whenever you own a franchise, the franchiser will want to ensure you are complying with their rules and not damaging the franchise’s brand. There are often numerous clauses in any franchise agreement that lay out what you can or cannot do, and what actions will result in you loosing your franchise. These are some of the most important clauses in the franchise agreement, so make doubly sure you understand each and every one of them.
5. Get a professional. Yes, you can do it all yourself and you’ll probably be fine. But buying a franchise can be very complicated, and you just may not have a lot of experience reading or writing legal documents. To be doubly sure your franchise agreement is a good one, you should consult a legal professional who deals with franchising situations. The money you spend consulting with them may seem like a lot at first, but it will be money well spent.
Franchise Agreements The Basics - To learn more about this author, visit Ian Macleod's Website.
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FRANCHISING AGREEMENT BASICS
What you need to look for when you want to start a franchise and are ready to sign the franchise agreement.
So you’ve taken all the appropriate steps; you’ve researched, asked questions, found out about the competition, scouted locations and lined everything up. Now it’s time to sit down and sign the franchise agreement. But before you do, there are several things you need to know. The franchise agreement will be the bedrock of your business, and success (or failure) may lie somewhere inside all those conditions and terms. A smart franchisee will read the franchise agreement very carefully, making sure they understand everything within it. Here are some of the most commonly misunderstood or potential problematic areas you need to be aware of:
1. Be sure negotiation is available. Some franchising agreements can be discussed, changed or amended, while others cannot. Make sure you know where your franchiser stands. It’s quite common for some clauses to be non-negotiable, while others are open to discussion. If you want to alter your franchising agreement, make sure you know what you want to change before you start negotiating.
2. Know what you can or cannot sell. Sometimes it will be very clear what you can or cannot sell through your franchise. Other times, however, it may not be. Make sure you understand exactly what kind of business transactions you are allowed to sell, what you are not allowed to sell and what isn’t mentioned. If something is unclear, you’ll want to get some clarification before you commit your signature to paper.
3. Marketing is vital. Franchisers want to see the franchisee succeed, but in their eagerness they may require you to sustain a marketing budget that is too high. If your agreement calls for a specific marketing budget, you may want to alter it so you have some more leeway. In the early years of a business, too much advertising can kill your cash flow, and being beholden to a set marketing strategy can cause difficulties.
4. Watch for default. Whenever you own a franchise, the franchiser will want to ensure you are complying with their rules and not damaging the franchise’s brand. There are often numerous clauses in any franchise agreement that lay out what you can or cannot do, and what actions will result in you loosing your franchise. These are some of the most important clauses in the franchise agreement, so make doubly sure you understand each and every one of them.
5. Get a professional. Yes, you can do it all yourself and you’ll probably be fine. But buying a franchise can be very complicated, and you just may not have a lot of experience reading or writing legal documents. To be doubly sure your franchise agreement is a good one, you should consult a legal professional who deals with franchising situations. The money you spend consulting with them may seem like a lot at first, but it will be money well spent.
Franchise Agreements The Basics - To learn more about this author, visit Ian Macleod's Website.
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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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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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