Category: Franchising

Franchise Professionals Share Objectives for Attending IFA Convention

February 2, 2010February 9, 2010 ·

A few weeks ago, I posted a discussion on various LinkedIn Franchise Groups about the upcoming 50th IFA Convention. I asked who was attending the event and what they were hoping to bring back to their organization. The response was great as many people not only shared what they were hoping to achieve, but also shared their thoughts about the event, past and present.

Take note of the objectives and offers of assistance as we share some of the responses…

Deb Evans, President and CEO at Computer Explorers, ICED – ” I am looking forward to connecting with the best in the franchise industry! I always return with new contacts and fresh ideas to implement. I am anxious to spend time with franchise friends I haven’t seen since last year. For anyone that is attending for the first time, feel free to connect with me. I am happy to provide some helpful tips regarding the weekend and meet in person!”

Sheryl Cassity, CIA, CPA, CMA, Director, Internal Audit – “Our firm is looking to expand our connections with the franchise community. We take advantage of this opportunity to reach new franchise concepts and re-connect with existing clients. The educational opportunities are extremely valuable. This is a great opportunity to learn what is important to franchising so we can respond better to meet the needs of the franchise community.”

Tanya Mitchell, CFE, VP Research and Development at Learning Rx – “I always come away with great new ideas for both franchisees and franchise development. I would love to learn new ways to market to qualified candidates, and how zors are using social networking and PPC to draw in qualified candidates.”

Christian Faulconer, CEO at Franchise Foundry – “We go for the networking and the education and we haven’t been disappointed. This year we are hoping to meet startup and emerging franchisors that we can invest in and help grow in 2010. ” I’m also excited to get the word out regarding what Franchise Foundry can do to help emerging franchisors so if you happen to be an emerging franchisor that is attending the conference, let’s chat.”

Christian also gave some strong reasons for young franchisors who are considering attending the event, perhaps for the first time…

1. You probably don’t know what you don’t know. The IFA conference is a great place to learn that there are a lot of smart people out there who know stuff that you don’t. The good news is that they are willing to share what they know.

2. You have a chance to network with people who’ve “been there, done that” and people in your same situation. Through our participation in the IFA, we have made connections that we will benefit from for years.

3. You may find out that you do something better than anyone else. It’s a very rewarding feeling to find out that you’ve been doing something right and to be able to share what you know with others.

Mary Ann O’Connell, CFE, President, FranWise Franchise Consulting – “I love to get together with my franchise friends. The entrepreneurial spirit makes them some of the most interesting people I know. After that, I use the networking and volunteer opportunities to market myself and my company’s services. I love to learn from everyone – what an incredible “university” of ideas we have there. From the seasoned veterans to the people with the newest ideas: there is still so much to learn.”

Scott Hoots, Director of Franchise Attractions at Ripley Entertainment – “I just confirmed I’ll be attending my first IFA convention this year. Looking forward to the interaction and the opportunity to expand my network.”

Marie A, VanDrisse, Executive Account Manager at F.C. Dadson – “I have two goals I’m trying to achieve. Since I’ve only been in the Franchise market for about a year, I want to use the educational seminars to gain knowledge on the in’s and out’s of the business. Secondly, what makes a trade show worth your while, for both myself and our company, is when your can gain either network or new business opportunities. The more networking functions the better.”

Across five different LinkedIn Franchise Groups there were over 40 responses and subsequent comments from executives representing franchisors and professionals representing service providers. All-in-all, there was a diverse representation that makes franchising what it is today. Many are looking to network. Others are hoping to learn. While others are seeking opportunities to generate business. All valid reasons for attending the 50th IFA Convention.

Ironically, the last comment posted was by none other than Dan Durney, Principal at Powerhouse Franchising who chimed in, “All I can say is… Long live the BRICK! See y’all in San Antone!

Yes, we’ll see y’all in San Antonio. Here’s best wishes for a successful event filled with lasting memories that will give new meaning to, “Remember the Alamo!”

Discussion About IFA’s 50th Anniversary Exemplifies What Franchising is Really About!

January 29, 2010January 29, 2010 · 1 Comment ·

Recently, on the International Franchise Association group on LinkedIn, I posted the following discussion, “The 50th Annual IFA Convention in San Antonio is less than three weeks away. Will you be attending? If so, what do you hope to bring back to your organization? If not, is there a specific reason?”

Many franchise professionals responded and explained why they would be attending the event. Most of the responses centered around sharing ideas and building relationships. Sure, some mentioned exploring new opportunities with potential and existing clients, but we are all in business to make money, right? But in addition to generating new business, almost all that responded were looking to interact with fellow franchise professionals. Hopefully, long-term relationships will be established over time and the franchise community will continue to evolve and strengthen.

One of the responses was from franchise veteran, Michael Seid. He stated that he had been going to IFA conventions for 25 years. I really admired the fact that he had attended these events for over a quarter of a century! Think about all that has changed in 25 years. Just think about the technological changes that have occurred during this period of time. I mean no one was walking around the IFA event in 1985 with a cell phone, right? How about a laptop? Could anyone have even imagined the internet and email? Heck, fax machines were barely around in 1985, albeit the ones that were used that ridiculous paper that always seemed to roll onto to the floor and under a desk… just out of reach.

Yes, times sure have changed, but the love and passion for franchising apparently has not. It’s just been passed onto people like Michael Seid. By virtue of his responses to my original discussion, and subsequent question, “I’m curious, what was the convention like back in, what, 1985?”, Michael takes us down memory lane and does so in such a dignified manner and with genuine sincerity, that he really seemed to pay it forward. For the benefit of all within the franchise community, I am honored to share his response below.

“1985 was in Miami if I recall and that was not my first so it may be longer than [25 years]. If I recall the attendance at my first convention was measured in the hundreds – not like we have now in the thousands. It was a much different association – we have come a long way with programming and content and member services. A lot of the founders were still around. I just got a great biography of Joe Francis from The Barbers who was very active years ago. If you did not know Joe you missed a great man – really a fine individual who went out of his way to give guidance to anyone who asked for his help. His son is still very active in the IFA. It’s a great quick read if you have not seen the book. Joe is gone 15 or more years.

The culture of the IFA has not changed. You can still corner an experienced member as a new comer and they seem always to be thrilled to mentor and give advice. I remember asking Fred DeLuca a question when I was new in the association and he spent two or more hours giving me his advice. That has not changed at all as most members today will do the same for a new comer.

Looking back at what has changed – No franchisees back then. That was a major difference Steve Lynn and Jim Bugg made that happen). No PAC to speak of (Sid Feltenstein changed that). No franchise appreciation day (Bernie Browning‘s idea). No Education Foundation only an education committee (I think Sid Feltenstein is also responsible for that). No thought of diversity or minorities in franchising (Ron Harrison). No VetFran (Don Dwyer‘s idea during the first gulf war). No Second Tuesdays (if it was not Lane Fisher and Scott Lehr then they were responsible for making it grow as it has). Who would have thought we would be looking at using franchising to provide products and services to the poor in the emerging markets and yet today we have the Social Sector Franchising task force. No CFE (John Reynolds). No one would have thought of a franchisee ever being chairman (Steve Siegel was the first and Doc Cohen the second). No franchisees or suppliers forum leadership on the board (Joyce Mazero if I recall was the first Counsel of Suppliers chair on the board and Jeff Kolton was the second – although we had no vote then. Supplier membership on the Executive Committee did not exist (I had that privilege when I was supplier chair to be the first because of Gary Charlwood).

I remember the IFA chair years ago saying that he would never let a mattress salesman (his word for suppliers) ever being on the board. Suppliers got a board vote when Gary Charlwood was chairman). No suppliers elected to the board in their own name for six years (I was privileged to be the first and Lane Fisher the second). No women as chairman (Joanne Shaw was the first and Dina Dwyer the second). No major investment in research (Mike Isakson). I think Jim Amos when he was chair actually creating the first IFA long range strategic plan. When Don DeBolt became president of the IFA we were near bankrupt and look at the great financial condition we are in now (Russ Frith as Treasurer did an amazing job). We did a lousy job in lobbying years ago and now we have a huge public affairs team. We dealt with Coble and LaFalce holding hearings on relationship laws in Congress and those days are gone.

Yes a lot has changed over the years. We owe a debt to a lot of some very smart folks who were in the leadership back then who kept adding great elements to make the association better. Along the way we had some who were less than stellar also but for the most part, we have been fortunate by those who chose to be in the leadership. Lets not forget the amazing job Debbie Moss has done in growing and professionalizing the convention supported by a really professional team of staff.

Still with all of the change, growth and the better financial condition of the association, the culture of the IFA has not really changed. I expect that many of the members/leaders from years ago who have not been active in the IFA will be at the 50th anniversary. Some of them will be surprised and pleased how far we have come.”

Franchising in the USA – Facts and Figures

January 23, 2010January 25, 2010 · 1 Comment ·

Franchise Statistics

* The Franchising industry employs over 8 million people in the US.
* The annual payroll for franchises is more than $229 billion.
* A new franchise is 2.5 times more likely to succeed than a non-franchised business.
* Franchising generated more than 18 million jobs for Americans , one out of every seven jobs in the private sector.
* Franchising produces $1.53 trillion in total economic output
* Franchising consists of over 760,000 establishments
* Did you also know that more than 50% of retail and service revenue in the United States come from franchised businesses?
* The franchise industry is a huge part of our national and local economy.
* One out of every 12 businesses is a franchised business.
* In 2000, the median gross annual income, before taxes, of franchisees was in the $75,000 to $124,000 range, with over 30% of franchisees earning over $150,000 per year.
* One new franchised business is opened every 8 minutes of every business day.
* The newest IFA study says that franchising is responsible for 760,000 businesses, 18 million jobs, 14 percent of the private sector employment, over $500 billion in payroll!!
* Franchise businesses account for almost 50% of all retail sales in the United States and Canada.
* Franchise businesses employ more than 8.6 million Americans
* A 1999 study by The U.S. Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business.
* A United States department of commerce study conducted from 1971 to 1997 showed that during that time less than 5% franchise businesses were shut down each year.
* Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non franchised businesses closed within the first 6 years of their existence due to failure or bankruptcy.
* Total sales by franchised businesses are expected to reach over $2 trillion, this year.
* 1 out of every 12 business is a franchise operation.
* A new franchise business is opened every 8 minutes of every business day.
* In 2000, the median gross annual income, before taxes, of franchisees was in the $74,000 to $125,000 range, with over 30% of franchisees earning over $149,000 per year.

As reported on Franchiseek.com

50th Annual IFA Convention – Do You Plan on Attending?

January 19, 2010January 25, 2010 ·

The 50th Annual IFA Convention in San Antonio is less than three weeks away. Will you be attending? If so, what do you hope to bring back to your organization? If not, is there a specific reason?

This year’s historic convention promises to be the best ever. Join the largest gathering of franchise business professionals at the premier franchise industry conference dedicated to excellence, education and relationship building. For 50 years, the International Franchise Association has worked to protect, promote and enhance franchising by advocating on behalf of the industry and hosting exceptional educational programming and networking opportunities. This year’s event will be no exception.

The 50th Annual IFA Convention, this year in San Antonio, Texas (February 5-8), promises to honor those who have made the industry what it is today and showcase the growth of franchising over the past half century. You will leave inspired, optimistic and ready to face the challenges that lay ahead.

Click HERE for more information!

Are New Franchisees Ready to be Successful?

December 15, 2009December 15, 2009 · 3 Comments ·

Last week on Franchise Today, Joel Libava (aka The Franchise King) and I discussed an except from Lizette Pirtle’s recent book, Franchise Success: The New Formula. The discussion pertained to whether or not franchisees are ready to be successful and whether or not it’s actually an assumption that is incorrectly made when a new franchisee signs on the dotted line. Further, the excerpt included a passage about an unemployed individual that entered into a franchise agreement, and his subsequent failure as a franchisee. In an attempt to jump-start discussion on this and other factors relating to franchise success and failure, I have posted the excerpt below and encourage all comments and opinions.

Franchise Success: The New Formula
By: Lizette Pirtle
Chapter 3: Readiness (Pgs 59-60)

We can’t assume that when people invest in a franchise they are ready to be successful. We can’t even assume that they were ready to make the investment in the first place. But we do make these assumptions. Yet, action does not necessarily equal readiness. There is much more to the investment decision and the success of franchisees than we have traditionally considered.

William was laid off from a job he enjoyed as the vice president of operations for a manufacturing company. He had unemployed for 6 months and was getting desperate. He had applied for every job available. He had lost self confidence and was becoming increasingly frustrated. He felt pressure from his parents, his wife and his friends who recommended he consider starting a business.

William never considered self-employment before, but the thought of working again and owning his own business became very appealing. The more he thought about owning a business, the more excited he got. He decided to acquire a franchise, and by the time he made this decision he was eager to start and his excitement was almost overpowering.

William was extremely intelligent and had been very successful in his career, but during training he experienced difficulty. He labored through many portions of the program and questioned new concepts with mistrust. Many of the exercises seemed difficult to him.

While his classmates joyfully excelled, William’s mood became somber as the training progressed. Sometimes he became hostile and withdrawn, while at other times he would engage and be open. The franchisor called him aside and offered him the option to leave the training and recoup his investment. William declined.

When he opened his business, William could not make the business go. He fought and resisted many of the marketing activities and, although he was always busy and worked hard, his efforts were fruitless. In spite of his qualifications and the full support of the franchisor, within 6 months of attending training, William closed his business.

Okay, franchise professionals, tell us what you think. How would you have handled this situation? What would you have done differently? How can we prevent these situations from actually happening within franchising?

Facts, not Fiction, Lead to Franchise Success

December 10, 2009December 12, 2009 · 5 Comments ·

The following is an article submitted by Guest Author, Katryn Harris. Katryn is the CEO of Open Box, a company focused on helping franchisors use technology to build their franchises. She brings her background in management, business strategy and communication as well as her team of technical experts to work with franchisors, ensuring that their technology fits their business strategy and moves their franchises forward. Be sure to check out Katryn’s blog.

Feedback Loops and Franchise Success
By Katryn Harris

A few days ago, I was talking with Greg Nathan from the Franchise Relationships Institute about his software product that helps franchisors select franchisees who are the most likely to succeed.

In brief, the Franchise Relationship Institute does this by benchmarking characteristics & traits of past successful franchisees and then providing a system that compares new applicants with those traits and characteristics.

Greg is a trained psychologist and works strong in the scientific tradition; hypothesize, measure, analyze and then compare results with hypotheses. One of his current projects is the validation of the exact extent to which is product is successful in predicting new franchisee success and, not surprisingly, his results will be fact based & very precise.

Listening to Greg talk about the validation project, I was struck again by how vital these feedback loops are to franchise growth.

Successful franchises implement the best programs and systems they can come up with, but then they measure, analyze and adjust based on the numbers and results (rather than what they ‘think’ is happening). And the faster they can complete this cycle (and then start it up again), the more likely they are to be successful in the long term.

From 1-800-GOT-JUNK?’s Net Promoter measurement tool to calculation tools for attrition rates to sales performance indicators, business growth is fueled by knowing exactly what is actually happen so the best actions can be taken. One of our customers ties client satisfaction records into payroll bonuses for their employees, which is a great motivator to get everyone in the company on board in trying their hardest to keep the clients happy – you can imagine what that has done for their referral and return customer rates.

What are your best scientific tools to create feedback loops and do more of what is working & change what isn’t?

50 Social Sites for Business Success

December 8, 2009December 12, 2009 · 5 Comments ·

The following article was recently posted online and should prove a valuable resource for all businesses looking to expand their social media efforts.

50 Social Sites That Every Business Needs a Presence on
By Inside CRM Editors

If your business limits its online presence to advertising banners and blogging, it’s missing out. The Internet provides powerful networking opportunities that allow users to effectively target their audience by logging on to social sites like LinkedIn, Digg and more. Take advantage of these tools by asserting your company’s presence online and reaching more potential customers, business partners and employees.

Social-Media/Social-Bookmarking Sites

Share your favorite sites on the Web with potential clients and business partners by commenting on, uploading and ranking different newsworthy articles. You can also create a member profile that directs traffic back to your company’s Web site.

Reddit: Upload stories and articles on reddit to drive traffic to your site or blog. Submit items often so that you’ll gain a more loyal following and increase your presence on the site.
Digg: Digg has a huge following online because of its optimum usability. Visitors can submit and browse articles in categories like technology, business, entertainment, sports and more.
Del.icio.us: Social bookmark your way to better business with sites like del.icio.us, which invite users to organize and publicize interesting items through tagging and networking.
StumbleUpon: You’ll open your online presence up to a whole new audience just by adding the StumbleUpon toolbar to your browser and “channel surf[ing] the Web. You’ll “connect with friends and share your discoveries,” as well as “meet people that have similar interests.”
Technorati: If you want to increase your blog’s readership, consider registering it with Technorati, a network of blogs and writers that lists top stories in categories like Business, Entertainment and Technology.
Ning: After hanging around the same social networks for a while, you may feel inspired to create your own, where you can bring together clients, vendors, customers and co-workers in a confidential, secure corner of the Web. Ning lets users design free social networks that they can share with anyone.
Squidoo: According to Squidoo, “everyone’s an expert on something. Share your knowledge!” Share your industry’s secrets by answering questions and designing a profile page to help other members.
Furl: Make Furl “your personal Web file” by bookmarking great sites and sharing them with other users by recommending links, commenting on articles and utilizing other fantastic features.
Tubearoo: This video network works like other social-bookmarking sites, except that it focuses on uploaded videos. Businesses can create and upload tutorials, commentaries and interviews with industry insiders to promote their own services.
WikiHow: Create a how-to guide or tutorial on wikiHow to share your company’s services with the public for free.
YouTube: From the fashion industry to Capitol Hill, everyone has a video floating around on YouTube. Shoot a behind-the-scenes video from your company’s latest commercial or event to give customers and clients an idea of what you do each day.
Ma.gnolia: Share your favorite sites with friends, colleagues and clients by organizing your bookmarks with Ma.gnolia. Clients will appreciate both your Internet-savviness and your ability to stay current and organized.

Professional-Networking Sites

Sign up with these online networking communities as a company or as an individual to take advantage of recruiting opportunities, cross-promotional events and more.

LinkedIn: LinkedIn is a popular networking site where alumni, business associates, recent graduates and other professionals connect online.
Ecademy: Ecademy prides itself on “connecting business people” through its online network, blog and message-board chats, as well as its premier BlackStar membership program, which awards exclusive benefits.
Focus: Focus is a business destination where business professionals can help each other with their purchase and other business decisions by accessing research and peer expertise. Most importantly, Focus provides open, quality information for all businesses that is freely available, easily accessible, and community powered.
YorZ: This networking site doubles as a job site. Members can post openings for free to attract quality candidates.
Xing: An account with networking site Xing can “open doors to thousands of companies.” Use the professional contact manager to organize your new friends and colleagues, and take advantage of the Business Accelerator application to “find experts at the click of a button, market yourself in a professional context [and] open up new sales channels.”
Facebook: Facebook is no longer just for college kids who want to post their party pics. Businesses vie for advertising opportunities, event promotion and more on this social-networking site.
Care2: Care2 isn’t just a networking community for professionals: It’s touted as “the global network for organizations and people who Care2 make a difference.” If your business is making efforts to go green, let others know by becoming a presence on this site.
Gather: This networking community is made up of members who think. Browse categories concerning books, health, money, news and more to ignite discussions on politics, business and entertainment. This will help your company tap into its target audience and find out what they want.
MEETin.org: Once you’ve acquired a group of contacts in your city by networking on MEETin.org, organize an event so that you can meet face-to-face.
Tribe: Cities like Philadelphia, Boston, San Francisco, New York and Chicago have unique online communities on tribe. Users can search for favorite restaurants, events, clubs and more.
Ziggs: Ziggs is “organizing and connecting people in a professional way.” Join groups and make contacts through your Ziggs account to increase your company’s presence online and further your own personal career.
Plaxo: Join Plaxo to organize your contacts and stay updated with feeds from Digg, Amazon.com, del.icio.us and more.
NetParty: If you want to attract young professionals in cities like Boston, Dallas, Phoenix, Las Vegas and Orlando Fla., create an account with the networking site NetParty. You’ll be able to connect with qualified, up-and-coming professionals online, then meet them at a real-life happy-hour event where you can pass out business cards, pitch new job openings and more.
Networking For Professionals: Networking For Professionals is another online community that combines the Internet with special events in the real world. Post photos, videos, résumés and clips on your online profile while you meet new business contacts.

Niche Social-Media Sites

Consider linking up with one of these social-media sites to narrow down your business’s target audience. You’ll find other professionals, enthusiasts and consumers who are most likely already interested in what your company has to offer.

Pixel Groovy: Web workers will love Pixel Groovy, an open-source site that lets members submit and rate tutorials for Web 2.0, email and online-marketing issues.
Mixx: Mixx prides itself on being “your link to the Web content that really matters.” Submit and rate stories, photos and news to drive traffic to your own site. You’ll also meet others with similar interests.
Tweako: Gadget-minded computer geeks can network with each other on Tweako, a site that promotes information sharing for the technologically savvy.
Small Business Brief: When members post entrepreneur-related articles, a photo and a link to their profile appear, gaining you valuable exposure and legitimacy online.
Sphinn: Sphinn is an online forum and networking site for the Internet marketing crowd. Upload articles and guides from your blog to create interest in your own company or connect with other professionals for form new contacts.
BuzzFlash.net: This one-stop news resource is great for businesses that want to contribute articles on a variety of subjects, from the environment to politics to health.
HubSpot: HubSpot is another news site aimed at connecting business professionals.
SEO TAGG: Stay on top of news from the Web marketing and SEO (search-engine optimization) industries by becoming an active member of this online community.

General Social-Media Sites

The following social-media sites provide excellent opportunities for businesses to advertise; promote specials, events or services; and feature published, knowledgeable employees.

Wikipedia: Besides creating your own business reference page on Wikipedia, you can connect with other users on Wikipedia’s Community Portal and at the village pump, where you’ll find conscientious professionals enthusiastic about news, business, research and more.
Newsvine: Feature top employees by uploading their articles, studies or other news-related items to this site. A free account will also get you your own column and access to the Newsvine community.
43 Things: This site bills itself as “the world’s most popular online goal setting community.” By publicizing your company’s goals and ambitions, you’ll gain a following of customers, investors and promoters who cheer you on as you achieve success.
Wetpaint: If you’re tired of blogs and generic Web sites, create your own wiki with Wetpaint to reach your audience and increase your company’s presence online. You can easily organize articles, contact information, photos and other information to promote your business.
Twitter: Is a social networking and microblogging service that allows you answer the question, “What are you doing?” by sending short text messages 140 characters in length, called “tweets”, to your friends, or “followers.”
Yahoo! Answers: Start fielding Yahoo! users’ questions with this social-media Q&A service. Search for questions in your particular areas of expertise by clicking categories like Business & Finance, Health, News & Events and more. If you continue to dole out useful advice and link your answer to your company’s Web page, you’ll quickly gain a new following of curious customers.

Job Sites

If you want to secure high-quality talent during your company’s next hiring spree, you’ll need to maintain a strong presence on popular job sites like the ones listed below.

CareerBuilder.com: Reach millions of candidates by posting jobs on this must-visit site.
The Wall Street Journal’s CareerJournal: The Wall Street Journal’s CareerJournal attracts well-educated professionals who are at the top of their game. Post a job or search résumés here.
CollegeRecruiter.com: If your firm wants to hire promising entry-level employees, check CollegeRecuriter.com for candidates with college degrees.
Monster: Post often to separate your business from all the other big companies that use this site to advertise job openings.
Sologig: Top freelancers and contractors post résumés and look for work on this popular site.
AllFreelance.com: This site “offers self-employed small business owners links to freelance & work at home job boards, self-promotion tips” and more.
Freelance Switch Job Listings: Freelance Switch is the freelancer’s online mecca and boasts articles, resource toolboxes, valuable tips and a job board.
GoFreelance: Employers looking to boost their vendor base should check GoFreelance for professionals in the writing, design, editing and Web industries.
Yahoo! Hot Jobs: This site is often one of the first places that job seekers visit. Post open opportunities and check out informative articles and guides to gain insight on the hiring and interviewing process.
Guru.com: Build your company’s repertoire with top freelancing professionals by advertising projects on this site, otherwise known as “the world’s largest online service marketplace.”

The original source of this article is InsideCRM.com, part of the Focus network of sites.

Franchising vs Licensing: The Debate Continues

December 5, 2009December 12, 2009 ·

Well, every so often the debate on Franchising vs Licensing continues. Today, I noticed another discussion on LinkedIn about the subject so I’ve decided to post the responses on this site and look forward to all additional comments and insight.

Franchising vs Licensing (as posted on LinkedIn 12/5/09)

“I have a client with a service-based business that was exploring franchising. Upon further research, he has decided to set up licensing arrangements instead. Based on what he told me, it seems like licensing is a much simpler way to expand his business. I am looking for both advice and experience sharing. I would also like to know where I can view a sample/boilerplate licensing agreement. Thank you.”

Here are a few of the responses…

Response: “A franchise is of course a license and a license is a franchise if it meets the definition of a franchise.

If a licensor sets out to offer a license that 1) allows the licensee to use the licensor’s brand name, 2) charges fees or royalties greater than $500 in the first six months and 3) has significant control or assistance over the licensee’s business activities/operations/marketing then that license is a franchise.

The fact is that when all three legs of the franchise definition are met the license is a franchise. You can try to call a franchise a license if you want, but this would be a perilous and reckless path to take.

Additionally, you can search all manner of Franchise Disclosure Documents (FDDs) which contain franchise agreements [online at California Electronic Access to Securities & Franchise Information].”

To this response, the individual that originally posted the discussion responded: “I was told by multiple sources that there is a difference.”

Response: “You are correct there is a difference between a license and franchise, however it is not a choice. It is determined by definition.

In other words, if you are going to license [your company] to a licensee, charge them an upfront fee and an ongoing royalty and direct them to use your system of services/marketing/operations then the license is a franchise.

If your license is by definition a franchise and you choose to ignore this fact then you are running a huge risk and the consequences in financial terms will make franchise compliance look cheap in comparison.”

I chimed in with a recommendation: “I highly recommend you read [an informative report] about the differences between franchising and licensing [by Rochelle B. Spandorf].”

I am sure the debate will continue as more and more individuals look for the easy and cheap way out. The long and the short of it is, “If it looks like a pig, and it smells like a pig, and it tastes like a pig… then it is a pig!” And, let’s keep one thing in mind – ignorance is not a defense in a court of law!

Google results: Franchising vs Licensing

Franchisors Financially Helping Franchisees: A few thoughts

December 3, 2009December 12, 2009 · 1 Comment ·

help Recently, I posted a discussion on the International Franchise Association group on LinkedIn about the topic of “Franchisors Financially Helping Franchisees.” Surprisingly, there were only a few responses on such an important topic.

The first responder stated, “…considering the economic conditions we’re dealing with. I’m interested in hearing what others are doing in this area.” I agreed and stated, “I just hope the franchise industry doesn’t put it’s head in the sand and expect things to be status quo. As I’ve mentioned in one of my blog posts, putting one’s head in the sand leaves a very important ass-et vulnerable for all the world to take advantage of. Not a pretty site!”

Anyway, I thank the franchise professionals that did share their thoughts. Every little bit helps in our dedication to franchise success at all levels.

A Director of Franchise Relations at a national franchise concept wrote: “We feel it is important to do what is within our means to help our franchisees succeed. After all, isn’t their success our success? We have waived royalties for franchisees that have experienced a slower ramp up, provided they are doing everything called for within our system.”

A Director of Franchise Development at a national franchise concept added: “We put a ton of resources behind the support we offer our franchisees both at the initial launch stage, and on an on-going basis. As such, we’ve viewed royalty waivers or reductions as methods that may help reduce some bleeding, but not as a means to turn things around. We would rather focus additional resources on local marketing and sales driving efforts designed to build sales and the franchisee onto solid footing. Cutting royalties only address on part of the problem without really getting to what may be the cause of the lower than expected performance in the first place. [Landlords] that indicate they want to see a franchisor reduce royalties as a condition of offering rent relief may not be aware of the investment already being made by the franchisor to help build sales. Ultimately, in our business, it is the ]landlord] that needs to live up to their end of the bargain in bringing traffic to the centers where our franchisees operate.”

And, the President of a business development organization rounded out the discussion by stating: “I think the decision to help and how to help is very complex. The franchisor has a lot to lose when a franchisee fails but not every franchisee will survive the current economic climate. If the franchisee is truly following the book, is capitalized as required, is willing to listen and not resist/mistrust the efforts of the franchisor, I believe the franchisor has an obligation to go well beyond what they might otherwise do. Sit down, assess the situation, formulate a mutually beneficial plan, get to work. A franchisor must never forget that the best and cheapest PR comes from its franchise system and that it cuts both ways!”

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