The Franchise Group recently attended the IFA Legal Symposium in Washington, D.C., where Lynne Hanson spoke on a panel about advising new and emerging franchise companies. The panel discussed hurdles that many new franchisors face when starting to franchise, such as budgeting for the costs of creating and maintaining a franchise program, planning for the evolution of the brand and building in flexibility to grow, protecting the brand and creating the appropriate legal structure for the franchise system.
Some key takeaways for new and emerging franchisors:
- Franchise for the right reasons – filling short-term capital needs is almost never the right reason.
- Short-term objectives should build on each other to achieve long-term objectives – never sacrifice long-term vision for short-term goals.
- Set realistic budgets for the short-term and the long-term plans for the system, including a separate budget for international expansion.
- Select franchisees carefully and develop relationships with franchisees and vendors that promote the evolution of the brand.
- Develop and enforce strong contractual provisions and policies to protect intellectual property and confidential information, and enforce standards to protect the brand on social media.
Another common hurdle discussed was how to deal with sweetheart deals given to friends and families of founders, usually early in the life of a franchise system. Often the founders give away too much in order to sell franchises which can create obstacles to the health of the system later on. Converting friends of founders to the standard franchise terms or transitioning them out of the system can be an important message to the rest of the franchisees that you are serious about treating everyone the same and you will be consistent in enforcing brand standards.
All in all, it was a great discussion moderated by Michael Daigle, Partner at Cheng Cohen, with great contributions from panel member Mike Nolan, Chief Executive Officer at Smashburger.
Click here to download the article, Advising New and Emerging Franchisors on Their Journey to the Next Level.