The Franchisee Voice

How to Protect Your Franchisee Equity

Posted on Date: Jun 27, 2019


The theme of the 2019 AAFD Franchisee Leadership Summit is “Protecting Your Franchise Equity,” however we very properly may need referred to as it “Reclaiming Your Equity.” Really, the essential advantages of enterprise possession anticipated by franchise house owners have been beneath siege for decades, and franchisees continue to see critical erosion of their potential to improve and safe the worth of their franchise investments.

Over the past sixty years franchisee fairness rights have continued to erode, with franchisors aggregating their control over a franchisee’s location, suppliers, advertising, and even retail pricing, as well as to the anticipated control over the branded franchise system. The notable exceptions to a disturbing development are the rise of franchisee associations which were in a position to leverage their collective power to reclaim prized incidents of ownership that outline and shield the equity value and return on funding.

In the 2019 Franchisee Management Summit Basic Periods we’ll alert convention delegates to the continuing ways that equity possession is eroding. More importantly, we’ll look at strategies and instruments to reclaim and shield franchisee fairness – principally by encouraging robust unbiased franchisee associations which might be in a position to leverage the collective power of their members to maximize the worth of their businesses by means of elevated market energy, negotiating leverage, legislative initiatives, and when mandatory, via obtainable dispute decision tools.

Negotiating the Greatest Outcomes

The primary and most fascinating technique to achieve, secure, and shield the fairness possession of your enterprise is thru negotiation. The perfect relationships and offers are achieved by means of a collaborative process designed to garner agreements that fulfill and reward all events to the relationship. Honing your negotiation expertise to obtain a good and balanced settlement is a learnable art.

Skilled counsel is an underappreciated and under-utilized device at your disposal. Deliver on counsel that understands the franchisee’s perspective and who can information you through the negotiation process so to acknowledge and respect great outcomes.

Appearing alone, most franchisees have inadequate negotiating leverage to entice and discount effectively. By sharing your assets together with your fellow franchisees by means of your franchisee association, you possibly can afford critical and professional counsel to guide your negotiations. Your association also has the power to deliver and commerce worth to your franchisor in change for the contractual rights and benefits needed to help your businesses succeed and to shield and improve what you are promoting equity.

Take the time to analyze your affiliation’s strengths, weaknesses, alternatives and threats. Do the identical on your franchisor. Pay attention to your franchisor’s objectives and be ready to show that your members are the most effective individuals on the planet to help achieve these objectives. Then supply to discount to deliver your franchisor’s objectives in change in your own. Quite than demand rights, make a discount for them. One of the best deals happen when everyone wins.

And on the end of the day, one of the best trade could also be to obtain a franchise system where the stakeholders all really feel rewarded and revered, and where the marketplace rewards the franchise system by an accreditation that claims the franchise is “best in class.”

All of this may be gained by means of collaboration and negotiation. It’s made attainable by having a robust house owners affiliation making use of its assets with in a position counsel.

The Importance of Legislative Influence

Every state and federal legislative district in america has franchised retailers in it, owned by franchisees. Franchisors most often solely reside in one or a couple of legislative districts. But, franchisors have carried much more political affect. Why? Because franchise house owners have historically completed a poor job of working together, and turning into lively within the political course of, in efforts to shield their equity of their companies.

It’s time to change the panorama and converse up. Franchisees are the money that drives the business.  Franchisees make investments, employ, help, and pay taxes in these native legislative districts. Our elected representatives need to be reminded of that, time and again. Will it make a distinction?  It positive will.  Imagine Congress hearing from 10,000 franchisees on one challenge. Not potential? Why not? There are that many franchisees in Subway alone. If we really interact franchisees, properly temporary them, give them succinct talking points, then why can’t we turn out to be a political drive?

Much of the issue exists because we franchisees too typically have our blinders on. We’re just working our franchises and dealing with the day-to-day issues preserving them operating. In doing that, we continue to develop our business, and most significantly, build fairness. But, is that equity protected? Learn your franchise agreement intimately before you answer that question. Being protected legislatively might help offer you rights you presently don’t have, like freedom of affiliation, termination rights, switch rights, and most essential of all, the truthful alternative to monetize your earned equity.

It gained’t occur without effort. Franchisees need to cooperatively work on legislative efforts and develop relationships with their elected representatives. Most of all, franchisees need to interact in mass to help causes that benefit franchisees. We will make this occur and we shall be successful!

Litigation Tools – Maximizing Assets for a Crucial Final Resort

Franchising is usually a breeding ground for litigation due to the distinctive relationship between the events. When the franchisee isn’t as successful as anticipated or when the franchisee perceives that the franchisor is just not providing correct help, the seeds of litigation are planted.

Many occasions, franchisees who’re struggling and dealing with vital financial losses take a look at litigation as their first choice. Franchisees invest greater than cash into their franchise. Additionally they invest vital mental and emotional power. When all of that’s threatened, the pure response is to go on the offensive. The most important drawback of litigation is that it isn’t a quick and environment friendly technique of resolving disputes. In the course of the litigation course of, the franchisee have to be in a position to put emotion apart and take a look at choices based mostly on sound enterprise selections.

Franchise disputes might involve product pricing points, issues related to prices of transforming a location, encroachment on protected territories, or use of the promoting funds just to identify a number of. Ceaselessly the parties usually are not looking for to finish their relationship however to clarify the requirements underneath the franchise agreement. If the objective in these kinds of instances is to keep the franchise relationship, the franchisor and franchisee have to be aware of their techniques and methods. Litigation is an adversarial process where both sides needs to “win” their case.  Nevertheless, it could possibly additionally lead to irreparable injury to the connection.

An necessary warning is that litigation might typically end result within the termination of the connection and may finish relatively than protect and improve a franchisee’s equity.

Hiring an lawyer skilled in representing franchisees is important. There are alternatives obtainable in need of filing a lawsuit or claim in arbitration. Many franchise agreements require the events to  attempt to resolve disputes by negotiation or mediation before litigation can start. Whereas informal efforts are a sensible first step, they could eat restricted franchisee assets and should restrict a franchisee’s rights of investigation afforded in courtroom. For the franchisor, early resolution might permit them to enter into a confidential settlement with out having to disclose the phrases within the Franchise Disclosure Doc. An experienced lawyer may help information the method and maintain franchisees alert and knowledgeable.

As ought to be clear by now, franchise litigation often is just not the most effective first choice when a franchisee has a dispute with their franchisor. Many franchise disputes arise due to a breakdown in communication between the franchisor and franchisee. In turn, the events might not belief one another, stopping both parties from rationally assessing the enterprise points at stake within the litigation. The parties develop into entrenched in their positions.

A franchisee association could also be important. If there is a system-wide problem, a robust franchisee association could also be key to reestablishing communication, and it’s harder for a franchisor to choose to terminate a relationship that includes numerous franchisees.

Not surprisingly, many franchisors discourage franchisees from forming associations. One of the objectives of the affiliation early in the course of is to persuade the franchisor that an association can assist in preventing and managing battle with the franchisees. The officers of the association, elected by the franchisees, can function informal mediators in probably contentious situations, akin to when the franchisees are struggling financially or when giant numbers of franchisees are upset with the performance of the system of the franchisor’s enterprise selections. If the franchisor continues to be resistant and the problems persist, the affiliation now has vital power due to the numbers of its members to proceed to litigation if needed.

While franchise litigation could be a priceless device to help franchisees in implementing their rights and defending franchisee fairness, it have to be rigorously thought-about. In any other case, franchisees might find themselves in an extended and dear battle with no certainty as to the top end result.

Negotiation, legislative influence, and litigation are all tools franchisees can use to shield, protect, and even broaden their franchise equity. Top-of-the-line tools, nevertheless, is building a robust and cohesive franchisee affiliation.

The AAFD invites you to attend the 2019 Franchisee Management Summit and Annual Conference, Sept 15 – 18th in Mesa, AZ (within the Phoenix metro area) to attend our session on protecting your franchise equity. Study extra about our management summit.