Protecting franchise by protecting franchisor
If you believe in people’s honesty this message will be of no interest for you. All my thoughts about protecting the rights of franchisor can even irritate you. For the rest I’m going to provide some analysis on weaknesses and treats for franchisor. I hope it’ll be interesting for many and useful at least for anybody.
Statement #1.
The most vulnerable are franchisors working in café and restaurant business. At the start-up period franchisor provides franchisee with almost everything: information on what equipment to use and where to buy it, commercial secrets and recipes. He helps to purchase the equipment and to decorate the hall. Can franchisor do less? Seems no… Otherwise a new café or restaurant will not be a part of a chain.
After agreement or license expires the former franchisee can easily change the name and some nuances in style (just the colors of walls or window curtains) and continue to work using the same equipment with the same qualified and trained personnel. And the most important fact is that they can continue serving the same loyal customers.
It works especially for small towns that are far from the city of franchisor’s headquarters. Former franchisee can easily study the local market, improve some details or adopt them to the local traditions. In most cases customers even will not mention changes in the name or colors. And everybody will be satisfied with lower prices caused by possibility not to pay royalty or other fees to franchisor.
What can be way out for poor franchisor? The first step is to take out a patent or author’s rights for all parts of technological process and recipes. At the same time a good help can be wide and well-developed advertising campaign and brand promotion. The last can create additional benefits for franchisee and he will extend the agreement.
Statement #2.
Sometimes franchisors do not pay much attention while developing their franchise proposal and agreement. Why? Because when you sell you first franchise license you usually sell it to a person you know (friends, neighbors, customers and so on). And you trust them. But when your business develops sometimes you may forget to make changes in the agreement for a “complete alien”.
The way out? Not to be so credulous and unsuspecting. You NEED to hire a lawyer.
Statement #3.
Franchise in the sphere of production can be protected more easily. In that kind of business franchisor usually supplies some special or even unique ingredients or components. As a classic example I can mention Coca–Cola, Pepsi, Schweppes. Their partners get concentrates but have no idea what they are made from.
But you have to remember that this will work only if your recipe or technology of production is really unique. In other case your franchisee will easily get your secret and bye-bye.
Statement #4.
Cooperation with franchisor has to be beneficial for franchisee not only at the first stage (when they sign a contract) and during many future years. And franchisor has to think about this the whole time. He can provide a favorable credit to franchisee to buy the equipment, can agree to postpone the payment for materials and other stuff , can provide additional services and so on.
Statement #5.
You can consider yourself a protected franchisor if your franchisees sell your unique products. It happens in the sphere of fashion and design and others when your franchisee is not more than a seller or distributor.
I can state that you are in desirable position.
Do I have more statements? Yes… And you? I’m waiting for your comments…