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What are a franchisee's rights and duties upon the termination of the franchise agreement? Upon termination of the franchise agreement for any reason, the rights and duties of the former franchisee are specified in the franchise agreement he or she signed. Typically these obligations include several key steps that are essential to the franchisor and to other continuing franchisees.
The first step is that a former franchisee should immediately cease using the logos and trademarks of the franchise system. This means that if you were a franchisee of ABC Doggie Daycare franchise, for example, you would need to remove everything showing that name and any logo, including on any signs, Yellow Pages listings, any advertisements, all stationery and brochures, etc. You would also have to change the decor that makes your location look like an ABC location and change any clothing that identifies your employees as part of the ABC system. If ABC was a food service franchise then any recipes and food products that were proprietary to the franchisor would also have to be removed. Read more »
As the economy struggles to recover from the deep recession of a few years ago, more and more emphasis by the media is being put on ways to buy American products. Just look at the scandal that was caused by the US Olympic Team wearing Ralph Lauren clothes that were made in China when our economy is still suffering and people are still unemployed. ABC News with Diane Sawyer has a segment called "Made in America" which discusses products and manufacturers that we can support by buying their American products and helping the economy. Our collective consciences are becoming more and more aware of our need as consumers to buy American products to improve the economy and put Americans back to work. But what are franchisors doing to buy American products, help the economy and encourage their franchisees to buy American products and select vendors who sell American made products? Read more »
The FDD is required to be written in "plain English". What exactly does plain English mean? Section 436.1 of the FTC's Franchise Rule (16 C.F.R. §436.1(o)) states that "Plain English means the organization of information and language usage understandable by a person unfamiliar with the franchise business. It incorporates short sentences; definite, concrete, everyday language; active voice; and tabular presentation of information, where possible. It avoids legal jargon, highly technical business terms, and multiple negatives." As you can see, plain English is the opposite of legalese. Read more »
Like other areas of business, franchising has its own jargon or vocabulary. The terms "master franchise" or "sub-franchise" and "area developer" have technical definitions, but are often used improperly. This article will help to define a master franchise or sub-franchise and area developer and distinguish them from other forms of expanding a franchise.
Franchise systems sell a master franchise (also known as a "sub-franchise") in order to more rapidly expand their brand and system. Often master franchising is used internationally. In that context, a master franchise or sub-franchise may be sold to a person or entity to sell franchises on the franchisor's behalf in another country. The master franchisee has the responsibility of selling franchises throughout that country. Typically the master franchisee will sell, train and support the franchisees of that country and act as their franchisor. This may make sense for the franchise system that is interested in expanding globally. Read more »
Should a prospective franchisee work with a franchise broker or consultant? I am often asked that question by prospective franchisees. Alternatively, someone will contact me and after speaking with me may decide that they want to look at other franchise opportunities. Typically, in those situations I refer the prospective franchisee to both the IFA website (www.franchise.org) and to a franchise broker or franchise consultant who does not charge the prospective franchisee.
A franchise consultant or franchise broker works with the "candidate" or prospective franchisee by performing almost a matchmaking service. A good broker learns about the prospective franchisee's financial and personal background and determines franchises that would be a good fit, both financially and personally, for the candidate. Read more »