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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 »
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 »
What should failing franchisees consider? When failing franchisees contact us for help with their franchise there are a number of concerns that need to be considered. This blog post is intended to provide some tips for those failing franchisees.
First of all, failing franchisees should consider consulting with their franchisors for suggestions and help. Many times failing franchisees are nervous about discussing their situation with the franchisor. However, the franchisor may have some valuable insight into ways that failing franchisees in their system can improve their businesses. In addition, the franchisor may be a valuable resource if failing franchisees would like to sell their businesses. Some franchisors maintain a list of locations available for resale and will list failing franchisees' locations. Read more »
What type of due diligence, investigation or validation should a prospective franchisee perform? A prospective franchisee, someone looking to invest in a franchise, should learn as much as possible about the business and franchise opportunity prior to signing any contract or paying any money to the franchisor. First and foremost, read the 23 items of the FDD. This document is supposed to be written in "plain English" for a prospective franchisee's review. Pay particular attention to Items 5, 6 & 7, the financial disclosures. In addition, review Item 20 to learn about the system and its anticipated growth. Read more »
Many states are attempting to level the playing field in franchising by creating statutes known as "fair franchising" laws. These bills and enacted laws are created to soften the harsh remedies often found in franchise agreements. They are created to make franchising less one sided and thereby fair to both franchisees and franchisors.
In essence, these fair franchising laws typically override the franchisor's franchise agreement and require that the franchisor provide greater notice and opportunity to remedy a default by a franchisee located in that state; require that the franchisor renew a franchise that would likely have terminated but for the state's fair franchising law; or require a greater time period for notice to a franchisee prior to terminating a franchise. Read more »