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FRANCHISE - A PARTNERSHIP - YOU BET

Guest post by: Keith King

Article Overview: IF YOU WANT TO FRANCHISE YOUR BUSINESS OR YOU ALREADY ARE FRANCHISING, DO NOT FORGET IT IS A PARTNERSHIP

FRANCHISE - A PARTNERSHIP - YOU BET

Many Franchisors and Franchisees forget that Franchising is a "PARTNERSHIP" between the Franchisor and the Franchisee. Financial rewards can only be achieved and be substantial if the Franchisor and Franchisee work together as a team and share in a common set of goals.

A prominent Canadian Franchise Lawyer calls franchising "THE DREAM MACHINE". He says franchising is "THE QUINESSENTIAL ENTREPRENEURIAL ACTIVITY". Franchisors dream of taking their idea and seeing it grow into an international organization, while Franchisees dream of running their own business and achieving financial independence.

The "DREAM" starts to break down if both parties do not hold up their end of the bargin. If not corrected, the Partnerhsip will break down. In most cases, there is a lack of communication. A lot of Franchisees will not speak their mind for fear of repercussions from the Franchisor.In some situations, the Franchisor does not know how their Franchisees really feel about the relationship.

There is a simple solution to this problem. I ,as a third party,have conducted many "FOCUS GROUPS" with Franchisees. In every case, this form of communication has opened up the lines of communication and with a good action plan, the "Partnership" has been stronger that ever.

Do not let this "Partnership" break down as it will effect the most important part of your business - THE CUSTOMER, who will control the ultimate scorecard of your companies success.

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Article Tags: FRANCHISE SCORECARD, THE PARTNERSHIP



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These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Information about doing franchise business in China - CHINA’S FRANCHISE LEGAL SYSTEM Introduction Franchises has a history of more than one hundred years in foreign countries, now it has developed to be a mature business mode, and it is widely used in many countries, especially the developed ones. Recently, franchises has been developing fast in China, covering more than sixty industries and trades such as catering, retailing, clothes-washing, indoor decorations and gym. However, the market order of franchises is chaotic in some industries and areas. There are also some illegal and criminal activities under the guise of franchises. Under such circumstances, several important laws have been promulgated to regulate the commercial franchising activities. Applicable Legislation The main legislative provisions governing the commercial franchising in the PRC are: the Measures on Administration of Commercial Franchises; and the Measures on Administration of Archival Filing of Commercial Franchises; and the Measures on Administration of Information Disclosure of Commercial Franchises Qualification for Franchisors According to the laws, the franchisors as those enterprises who own such business sources as registered trademarks, enterprise logos, patents and proprietary technology, and license these business sources to franchisees. Firstly, the franchisors shall be enterprises, excluding other economic organizations and individuals. Secondly, the trademarks which can be licensed to franchisees shall be registered trademarks. According to the Trademark Law, the trademarks, whether registered or not, are protected under the laws, though there is difference in the vigor and extents of protection. It seems that the Ministry of Commerce has restrictions in recognizing trademarks, since it only provides “own trademarks to be licensed to others” at large, which causes chaos in practice. In the cases relevant to franchising disputes which we provided legal service to, all of them involve the situation that the franchisors granted licenses of non-registered trademarks or the trademarks which were in application to others, and when there was infringement on trademarks, the franchisors were unable to prevent infringement on trademarks. Then the interests of the franchisees could not be realized. What’s more, franchising activities with non-registered trademarks also, to some extent, encourage commercial frauds. Thirdly, the logos, patents and proprietary technology of enterprises are included in the business sources to be licensed to others for the first time, which enlarges the application scope of franchises and will improve the development of franchises. Requirements to be Met in Carrying on Franchising Activities In addition to the condition that only the enterprises will be allowed to carry on franchising activities referred to above, the franchisors shall also have mature business modes, and are able to provide business guidance, technology support and training. The enterprises which copy the manuals, websites and enlisting documents of others, and have no service abilities for providing business guidance, technology support and training shall be excluded. What needs pointing out is that even these enterprises that are allowed to carry on business may face with the suits claiming them for unfair competition and infringements on intellectual properties. In addition, the Measures clearly request that the franchisors shall operate at least two directly operated shops, and the period of operation shall be more than 1 year, which aims to prevent frauds by the way of franchising. Information Disclosure Requirements and Regulation on Franchisors Information disclosure system is the core system of franchising. The laws provides that the franchisors shall establish and implement a perfect information disclosure system, and provide the relevant information and franchising contracts in written form, at least thirty days before execution of franchising contracts. It also sets out the specific provisions on the information which shall be provided by franchisors, including the basic conditions and commercial reputation records of the franchisors and their legal representatives, business sources owned by franchisors, abilities of franchisors to provide service to franchisees and management and supervision on business of franchisees, franchisee fees and the payments, and budgets for investment in franchising shops. To the franchisors that violate these provisions, the authorities in charge of commerce will order them to rectify, charge penalties and make public statements. Archival Filing and Public Announcement Systems To protect the franchisees’ lawful rights and interests, considering the asymmetric information between franchisors and franchisees, in addition to intensifying information disclosure requirements and regulating the activities of franchisors, the Measures also bring in the archival filing and public announcement systems. The Measures provides that the franchisors shall make a filing with the commerce administrative department within 15 days after the execution of franchising contracts for the first time. Anyone who intends to engage in any commercial franchise activities within a province, autonomous region, or municipality directly under the Central Government shall go through the archival filing formalities in the commerce administrative department of the people’s government of the province, autonomous region, or municipality directly under the Central Government where the franchisors are located. Anyone who intends to engage in any commercial franchise activities beyond a province, autonomous region, or municipality directly under the Central Government shall go through archival filing formalities in the commerce administrative department of the State Council. Any franchisor having been engaging in franchise activities before May 1, 2007 shall apply for archival filing at the commercial administrative department. The Ministry of Commerce has established the national network for archival filing work relating to commercial franchise. Any franchisor shall go through the archival formalities through the government website. The general public may obtain the following information through the government website of the Ministry of Commerce: (1)The registered trademark(s), enterprise mark(s), patent(s), know-how and other business resources of the franchisor; (2)The franchisor’s archival filing date; (3)The location of the legal business place, contact information and name of the legal representative of the franchisor; and (4)The location of the business place of the franchisee(s) within China. The authorities in charge of filing will cancel the archival filing if there is any following activities of franchisors, and make public announcement on the government website: (1) the business licenses of the franchisors have been withdrawn by the registration administrative authorities for illegal business; (2) the authorities in charge of filing receive judicial suggestion letter on cancellation of archival filing from the judiciary for illegal business by franchisors; (3) the franchisors conceal the relevant information or provide false information, which has been proved; (4) the franchisors carry on cancellation by themselves. In addition, the illegal activities of the franchisors will be announced to the public. By Erex Chen, a Chinese lawyer based in Shanghai.


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