Franchise Renewal Agreement

Is it that time of year again? Often it’s a time of celebration with your franchisee, marking another solid year of continued growth. If it has not been stellar, prepare to hear all about it.Then again, this is a time of rebirth and renewal and there may have been some changes you would like to see in current and new franchisees. Take this time to reflect on what you want to change and then make it happen. The real power lies with the current franchisees who have a large stake in the organization. Changing things now may upset them or empower them – you may want to talk with them in a focus group setting or simply one one one over the phone – or better yet – over lunch, your treat.

Whatever the venue, the power is in the paperwork. What is promised to one must be afforded to the other. So it is with all contractual paperwork. The tough part is hammering out all of the same documents but feeding different names in each caption. This can be done with a mail merge type macro but I found it is easier using a simplified franchise system. The first step of course is to consult your franchise attorney about any new changes to the business – making sure you can make these changes will be key to franchisee survival and renewal. Making those changes and getting it all down on paper is often the tedious part, what with copying and pasting nonstop. Then again a software application like FranZoom’s Pro Bundle offers the ability to simply type and print – to all franchisees. Thus saving you time and money from having to edit each individual ones address, franchisee number and franchisee location.

Once you have all of your contracts in order its best to contact each franchisee personally and let them know the changes that are forthcoming. Surprises are great for birthdays, not so much for business. Your franchisees know their rights and must be assured that staying with your franchise system is a more viable option than being forced into a non-compete clause.

Branding Your Franchise

More than having a snazzy logo or a catchy jingle, franchise branding includes every small minute detail up to and including the largest consistent message. Having a known brand or a well known brand is in and of itself one of the most important items to be shown in your FDD. This enable the potential franchisee to see how well the franchise has grown and to what extent it has a following.

The costs involved in franchise branding outweigh the emotional tie back to the product itself. When looking through your franchise system consider the appeal it has as a whole. Ask yourself the following questions:

• Is the overall image and graphics appealing
• Does the product speak for itself
• Could a focus group pick my product over another based on prior knowledge of the market.

This is an ongoing battle for most franchise owners. The outlay of capital and time to build the message your system needs to convey are controlled wholly by you in the beginning. As time goes by and more franchises are sold the advertising can be controlled by the franchise association members. This will certainly help in that this is one more thing you don’t have to worry about getting accomplished offering you more time to work on other markets.

Stay consistent with your advertising by always using the same logos, colors and marketing material. This lets your customers know that the product is strong and will always stay the same. Repetition is key to a well known company image. For example; do you know any corporate jingles that you know by heart?
Along with this stay consistent with the paperwork that you use with your franchisees. Having the same work and the same form numbers shows consistency in your business and gives them comfort knowing that things will only change if necessary.

Your First Franchise

The very first franchise sale is one of the most important as it details how the rest will need to be performed or if changes need to be made. The learning experience on this one act alone will clearly show if the bond between franchisee and franchisor will be strong. You will both have a learning curve and need to adjust accordingly.

As the first franchisee you have an excellent opportunity to be in on the “ground floor” or “grassroots” of the franchise organization. This often entitles you to be consulted about many decisions on the direction of the organization and any time that needs a re-write. This is your time to shine as your ideas will be put into use for the next new franchisee. So if you want to make an impact into your new franchise business this is the best way to do so – be the first!

As for the franchisor this first franchisee is your gateway to branding your product or service and getting it some exposure that it needs. Helping this first franchisee is of the utmost importance and ensuring their success will only add to your growing list of profitable organizations that can be shown within your Franchise Disclosure. The FDD will prove to interested parties how well your franchise system is working and will often lead to faster closings.

Look to the people you already have working for you to be your first franchisees. These individuals already know the layout of the business and are able to reproduce it without you being there. These managers and employees will also be your trainers to the new franchisee so be sure they are kept up to speed on paperwork as outlined in your FDD.

Changing or altering your FDD in any way will need to be done so electronically. Quite often the rules will change dependant upon the sate with which you will sell franchises. Having these digitally stored is franchising magic at its best – the ability to reproduce a document and send it electronically in seconds will ensure your franchisee sees you are technically savvy and able to quickly produce the paperwork needed.

Franchise Territory Agreements

Franchise territory agreements are a necessity for the franchisee and the franchisor. The agreement allows the franchisee to operate within the confines of a certain market knowing the franchisor will not sell that market to any other. As well, the franchisee is usually given every right to purchase other available markets. The way in which this helps the franchisor is that it allows them free reign to bring in the franchisees they need to fulfill market demand.

What often happens in some situations is the franchisee believes that the market they “want” to develop in is often available and may begin to work that area. This will lead to conflict as the franchisor may be pursuing leads in that area to develop in. If the franchisee fails that market it typically takes some time to rebuild the exposure for the franchisor.

Having a contractual obligation to perform is one thing. Having rules set forth from the very beginning is another. The franchise contract is a great set of rules for both franchisee and franchisor to live by and as a franchisor you must adhere to these rules as strictly as possible, the same being said for franchisees. Your franchise territory agreement will assist in mapping out the areas with which both parties may work. If you are a new franchisee, ensure you are afforded the opportunity to build in your area or if an older franchisee – you may wish to switch markets or even buy more. Whatever the reason, read your territory contract word for word. The franchisor should have all paperwork up to date as some markets may no longer be available. Maintain good contact with each other as well as keeping your paperwork up to date will aid both parties in settling franchise limitations and agreements. The best way to handle territory agreements is to have them digitally stored so they can be immediately dispatched to the proper party.

Marketing Your Franchise Based System

Until you have sold your first franchise you won’t know the cause and effect of your marketing efforts. As soon as the first franchise is sold and all the paperwork has been signed and the check is in your hand, business starts to make its mark and rear its capitalist head. Funny statement, but nonetheless true.
Think of the process by which you made that first franchise sale. You began with some advertising either by print, media or word of mouth. Still the message you had something for sale made its way to the right person. Often the first buyer is an employee of your newly franchised business. Now the fun begins. With the sale come the after-effects of making sure it is flowing in the proper direction – towards profit.
With franchising, most franchisors won’t see a return until they have sold a number of franchises and this takes some advertising. When it comes to advertising nothing is more effective than doing so in a large enough group. With 10 or more franchises comes a lower ROI when it comes to advertising dollars. If all 10 franchises were putting in a fair portion of advertising costs it then lowers the cost for all members yet increases the market share.

All franchises should have some form of Advertising Agreement and are typically the rules by which to follow when forming an advertising coalition or small media group between franchisees. You as the franchisor grant the right to the franchisees to form an advertising group and use their advertising dollars as they see fit. All of this and more should be in that contract and will often determine final say on verbiage and design. Check your marketing contract contained within your FDD, it speaks volumes on how a franchisor operates and control paperwork.

Franchising and the Legality of Oral Contracts

It used to be when one person shook hands with the other this formed a viable contract. As most people tend to believe that this age-old method still applies may be in for quite a shock. More often the “handshake” or “verbal commitment” is good enough for most people… when the deal is for less than a few dollars or a promise to help move furniture. As people’s business practice evolved so to have the business instrument that guides both parties. That business instrument being a physical contract whereupon both make their mark to agree to terms of the “deal”. When it comes to franchising a business or buying a franchised business you’ll find that everything will be in the physical form.

An oral agreement may work for some franchisees but the promises placed must be produced or problems arise on running a successful and financially viable franchise. What one considers to be an oral arrangement most courts would expect you to show proof of the arrangement. Will you win in court? That all depends on your evidence, and really, how often do you record your conversations? As well, some state and county courts do honour oral agreements with a limit on monetary value, say less than $500 USD.
So as a franchisor or a franchisee the rules must be applied that anything that is needed to be done by either party must be written if it is to hold any weight with a court of law. An agreement can be a standard form but it must be approved and signed by both parties which then signify both parties understand what they and the other party must do to fulfill the contract.

Franchise paperwork is rather lengthy and often cumbersome when it needs to be edited as the franchisor may have to deal with rulings from several different states. This contract paperwork must always be up to date and available as you never know when a new franchisee will sign on to represent you.

« Previous Page