Franchising vs Licensing: The Debate Continues

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


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Franchisors Financially Helping Franchisees: A few thoughts

helpRecently, 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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Questions That Decision-Makers Ask About Social Media

The following is a recent discussion in one of the Social Media groups on LinkedIn. As always, I’ll keep the individuals anonymous and only identify by their Linkedin description. The discussion was started by a Digital Marketing Consultant. Not only did he ask the question, he provided his answers as well.

questionsFive Questions Your Boss Will Ask About Social Media (and the answers)

1. Isn’t social media just a new type of ad?

No it’s more than that, it’s actually a whole new way of reaching clients. If you think of ads as one technique used to communicate your value to prospects, social media is a whole new channel to do this. Yes you can still communicate your value but rather than trying to cram it all into one sentence (as you would with an ad) you have to be a bit more patient.

2. Isn’t all this social media stuff expensive?

Well yes and no. From a cash investment perspective, most of the top online social media services are free of charge to register with. However, to really make an impact through these tools you need to spend a lot of time on them. You have to explore, see who’s talking about things related to your company and try to open up a dialogue with them in a non-creepy way.

3. But I hear it’s all a fad anyways

Certainly various social media services will come and go and some will be a bit more gimmicky than others, but the underlying principle of social media, transparency, is hard-coded into the very DNA of the world wide web. If you can build your social media ‘muscles’ on one tool you’ll quite easily be able to transfer this skill set and mentality to other tools.

4. It’s all very well to make ‘friends’ online but SHOW ME THE MONEY

There are clear cut and well documented examples of companies making money from social media. But it doesn’t quite work like a typical print/online ad. You’re not likely to get a flood of business from your first blog post, your first message on Twitter or your first video uploaded to Youtube. But as you start developing a base of followers you can really start to leverage the power of social media. Imagine having a few thousand online users following your every uttering on Twitter, or subscribing diligently to your blog updates. These become powerful channels for launching new products, promoting special offers and even testing products.

5. Ok, so I guess we’ll need to hire some guru to get us set up?

By all means if you can hire one of the multitude of talented social media gurus and specialist agencies. But I think you’d do just fine with a couple of diligent, friendly and passionate members of staff. After all, you and you’re staff know your product and your clients better than any guru. Also, in the world of social media, an authentic, if perhaps clumsy approach trumps a polished but scripted approach. People can usually see through that quite quickly and your credibility will drop dramatically.


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Employer Social Networking Policies: Part II

The following was written by franchisEssentials Guest Author, Megan Erickson of the Dickinson Law Firm as follow up to Employer Social Networking Policies that we reposted on this site last week. As you may know, Megan is the author behind the recently launched Social Networking Law Blog.

In response to last week’s post, one of our readers commented, “I look forward to your further insights in this area. It is something that “MUST” be thought out by companies today. They really have two choices. A policy of engagement in the Social Networks or staying out altogether. And if they engage they need to seriously engage their employees and impress upon them how being active in social networking sites means that they are a representative of their company and that in the long term their actions will affect the company’s rep in the world.”

Employer Social Networking Policies: Pre-Drafting Considerations, Part II
by Megan Erickson of the Dickinson Law Firm

As [recently] noted, I plan to write a series of posts addressing social networking policies in the workplace. In [recent post] post, I discussed some things an employer may want to think about before drafting social networking policies — including some things to keep in mind when starting with a sample policy. I’ll build upon that by offering a few considerations here for employers to ponder as they begin thinking about drafting, updating, or maintaining a social media policy. This list is by no means exhaustive, but is meant to help employers focus on personalizing social networking policies (and hence, make them more effective).

* Don’t be afraid to take care of some groundwork before involving an attorney, but focus these initial efforts on identifying the company’s business interests, needs, goals, and expectations as they relate to the policy. This will make your lawyer’s job much easier, and may save your company time and money. For example, if you want to encourage social media use among your employees for marketing purposes, your policy will set the parameters within which your employees operate. The framework for such a policy will significantly differ from an employer whose primary goal in establishing a policy is something else (such as the protection of confidential information).

* Brainstorm how the policy should address both: (1) online activity which occurs on company time or using company resources (i.e., blogging at work, Facebooking on company laptops, etc.), and (2) online activity, regardless of when or where, which may have implications for your business (i.e., complaining about work on personal blog from personal computer after-hours that discloses trade secrets).

* Thoughtfully consider how far the restrictions should go. Keep in mind practical considerations. Not only do many studies suggest it’s not good for morale or recruiting to ban all social networking sites or Web 2.0, an all-out ban will be difficult to enforce. Take a realistic approach, and bear in mind ad-hoc policing could easily lead to selective enforcement issues down the road.

* How do you monitor employee technology use? Federal and state privacy laws should shape your policy.

* Consider quirks of your particular workplace technology that might present special considerations. For example: Do employees have company-issued web-enabled cell phones? Do you want policies addressing text messaging? Pagers? Off-duty conduct on company laptop during non-work hours?


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Franchise Success: The New Formula

Recently, as I was preparing for the Frantelligence Webinar series with Franchise Business Review, Lizette Pirtle, the author of various blogs including Small Biz Franchise and International Expansion Experts, contacted me to discuss franchise client support, and being able to provide information to her franchise clients. I could immediately tell that she had a definitive passion and desire to help her clients and provide them the resources necessary to continue to build their brands.

franchise success the new formulaSince then, Lizette introduced me to her new blog and book, Franchise Success: The New Formula. Clearly, Lizette is an expert in franchise operations and training at franchisee and franchisor levels. Her more than 20 years franchise experience is expansive covering daily operations, marketing, communications and training. She is passionate about designing franchise operational and training systems that allow franchisees and franchisors achieve the success they seek. With a knack for breaking concepts down and creating efficient and effective processes, Lizette derives tremendous joy in assisting her clients discover and implement their vision. A preview of the book confirmed my thoughts about Lizette’s passion and desire. The book is a definite must-read for anyone in franchising.

Would You Like a Complimentary Copy?

To download a complimentary copy of the book, please click HERE. Once you’re directed to the “Get the Book” page, scroll down to the “Do You Have a Gift Code?” section and look for the “Courtesy of Paul Segreto of franchisEssentials” link. Click the “Download” button and when prompted, type in the case-sensitive Gift Promotion password, “franchisEssentials1” to receive your complimentary copy. All we ask is that once you read the book, please let Lizette know your thoughts, comments, suggestions or stories HERE.

Would you like more than an e-copy? If so, the actual book may be purchased on Amazon.com!


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Local Business Listing, Search Engine Rankings and Mobile Devices

The following article has been submitted by Guest Author, Melih (“may-lee”) Oztalay. Melih is CEO of SmartFinds Internet Marketing, an internet marketing company known for developing very creative marketing strategies. Before starting SmartFinds, Melih ran one of the Detroit Metropolitan area’s premiere Internet Service Providers (ISP), SpeedLink, from the early 1990’s where he served for nearly a decade as President and CEO. In the new century he has pursued taking the creative and marketing services from his experience in the 1990’s to businesses via SmartFinds Internet Marketing. franchisEssentials is honored to have Melih as one of its Guest Authors.

local-listingLocal Business Listing, Search Engine Rankings and Mobile Devices
by Melih Oztalay, CEO at SmartFinds Internet Marketing

There has been an ongoing difficulty for small local businesses to benefit from the Internet. Particularly if they are completely dependent upon the local market. Yes, those businesses still do exist and will continue to exist. As technology has been developing, there is an answer for the local business. It comes in the form of the major search engines having free local listings.

What Are Business Local Listings? In summary this is your free yellow page listings by Google, Yahoo and Microsoft. Do you still need to advertise with the Yellow Pages? This need is definitely dwindling. The upcoming generations are using the Internet and their mobile phones. Most probably are not familiar with the hard copy yellow pages. Baby-Boomers are a growing group of mobile device users…and certainly EVERYONE is using the Internet.

Why Use the Local Business Listings? There are a number of reasons why the Internet local business listings are important to the local business.

1. Listings can show up in search results
2. Helps advertise business for free
3. Helps promote any discounts, offers, promotions
4. Displays on Mobile maps (e.g. iPhone)

The benefits help to increase your exposure through the Internet with this free listing. It can help you reduce your yellow page costs and makes sure you can get in front of your customers when they need you through the Internet or their mobile devices as they are around town.

Additionally these local listings help give you the opportunity to get more information in front of your customers than the yellow pages can ever offer. This would include your menus, your products, services, photos, videos, coupons, offers, promotions to mention a few.

Did we mention this was a free listing? Did we also mention you can update this listing anytime you want? And, lastly, you get statistics about your statistics. Now we’re confident the yellow pages cannot provide statistics. The benefits far outweigh the costs from the hard copy yellow pages.

Do you need your own website? No. Would it benefit you? Possibly, but dependent upon your business. Your free local business listing could be your website. The reason for having your own website would be because the free local business listing is not allowing you to add everything a customer may wish to see.

Like everything else on the Internet, it is best to work with a professional firm that can help get this setup for you. You have to be sure to have the right keywords for your business, along with knowing how to get the listing up to date so it benefits with immediately. Once the local business listing has been updated you can either maintain the information yourself or continue having a low cost monthly fee to have it maintained and monitored for you.

Monitoring your listing is very important as customers have the ability to post reviews about your products, services and business. Of course their ability to review you are not limited to the local business listing and include everything from Angie’s List to Complaint Boards on the web. While this may sound like a negative, you can turn customers with problems and complaints to long term relationship. You have to address their concerns and have them reach out to you instead of the Internet with their emotional frustrations.

Whether you are a single store, have multiple locations, are a franchise or a bank with multiple branches, you will want to learn more about local business listings. Learn more about Local Business Listings and submitting them to the search engines and other local related business websites and directories at SmartFinds Local Business Listings.


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Employer Social Networking Policies

social media and the lawThe following was written by franchisEssentials Guest Author, Megan Erickson of the Dickinson Law Firm. Megan recently started Erickson’s Blog on Social Networking and the Law. The blog addresses legal issues relating to social media and Web 2.0. Megan states, “This blog is in its early stages, so I hope you’ll continue to check back as I add content and get a chance to make improvements.”

Rush Nigut, who publishes the blog, Rush on Business, recently posted, “Now that’s a blog that will have a never ending flow of posts. She already has an interesting array of posts… This is one blog I’ll be sure to follow.”

Employer Social Networking Policies: Pre-Drafting Considerations & Dangers of Sample Policies
by Megan Erickson of the Dickinson Law Firm

Employers often want to know more about permissible or effective social networking policies for their employees. Of course, there’s no such thing as a “one size fits all” social media policy for employers, but I think readers might find it helpful if we took some time to address important considerations involved in drafting, updating, or maintaining a policy addressing employees’ online activities. With that goal in mind, I’m going to begin a series of entries specifically tackling some of those issues.

Pre-Drafting Considerations

These issues arise even before the policy drafting begins — so that’s where we’ll start. The planning stage of an employer’s social networking policy defines the later effectiveness of the policy. It may be wise for information technology personnel, human resources professionals, other internal company decisionmakers, and legal counsel to sit down together to determine the employer’s business interests, needs, goals, and expectations under the yet-to-be-drafted policy.

Sample Policies or Model Guidelines: Don’t Forget to Assess the Company’s Unique Needs

It’s important to keep in mind that although model policies or sample guidelines may offer some helpful “nuggets,” those policies derive from unique business considerations – which may or may not align with the business interests of other companies. For example, many employers look to the IBM Social Computing Guidelines – one of the first publicly available social media policies. While I do think IBM’s policies are lovely, all the attention given to IBM’s guidelines (and model policies in general) easily distracts employers and discourages them from carefully analyzing their own unique objectives.

As a technology company, IBM has been motivated to actively encourage employee use of social networking. Other employers probably do not have the same motivations. More than 10 years ago, when most employers were trying to limit employees’ online activity, IBM was encouraging its employees to use, learn, and participate in online activity; the company continues to advocate its employees’ participation in Web 2.0. The overarching business interests of a technology company like IBM (i.e., promoting use of online media for marketing and business reasons) may conflict with the overarching business interests of other employers (i.e., perhaps a greater need to protect proprietary business information).

In sum, if human resources professionals at Acme, Inc. look to a sample policy for drafting guidance, they should always bear in mind that the fundamental principles underlying IBM’s (or anyone else’s) guidelines may not best serve the interests of Acme. At the risk of sounding very “lawyer,” I now point out the obvious: social networking policies, as with most employment policies, require individualized attention and should be specifically tailored to the needs of each employer.

Sample Policies or Model Guidelines: Quality Control

The other problem with examples found online is quality control. Googling “social networking policies” may give an internet user a list of results, but it generally doesn’t disclose things like: who drafted the samples, the employer’s jurisdiction and applicable law, or the business interests driving the policy. In other words, the policy could have been drafted by an idiot, it might address too much or too little, and Company A may be focused on helping its sales team effectively use Facebook as a marketing tool while Company B just wants to keep its associates from divulging confidential financial information on MySpace.

Without properly assessing the business interests and concerns the employer wants or expects its social media policy to address, the resulting policy will be of little value to the employer. Before drafting any guidelines, employers should focus on the fundamental framework for and guiding principles behind their anticipated policies.


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The 5th Annual Franchisee Satisfaction Awards

FBR awardsThe Franchisee Satisfaction Awards sponsored by Franchise Business Review are the industry’s most prestigious awards, honoring excellence in franchising. Each year, Franchise Business Review conducts thousands of independent surveys of franchisees across the industry. The Franchisee Satisfaction Awards recognize the leading franchise companies with the highest levels of overall satisfaction among their franchise operators.

Franchise Business Review presents awards to the top rated franchises in 17 industry categories: Advertising & Sales, Automotive, Business Services, Child Services, Cleaning & Maintenance, Financial & Tax, Food, Health & Beauty, Home Services, Pet Services, Real Estate, Specialty Retail, Senior Care, Services, Sports & Recreation, Technology and Travel & Hospitality. The top franchise within each category is also honored with a Best Franchise in Category award. Additionally, franchise companies are recognized in other categories including investment level, overall system size, most improved satisfaction, and Franchise of the Year.

Since 2005, nearly 500 leading franchise systems have participated in Franchise Business Review’s annual Franchisee Satisfaction Awards. 150 of those franchise businesses have been recognized for their system’s excellence, as rated and reviewed by their own franchisees.


FOR MORE INFORMATION

REGISTER HERE


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How will the CIT bankruptcy filing affect your business plans for 2010?

After struggling for months to avert bankruptcy, lender CIT Group has filed for Chapter 11 protection in an attempt to restructure its debt while trying to keep badly needed loans flowing to thousands of mid-sized and small businesses.

“Analysts warned that the bankruptcy could add to the uncertainty around loans for the nation’s small businesses, especially retailers, which make up a significant portion of CIT’s clients and are already struggling with tight credit markets.

CIT is the financier for about 2,000 vendors that supply merchandise to more than 300,000 stores, many of which are gearing up for the critical holiday shopping season. They rely on the lender to cover costs ranging from paying for orders to making payroll. Any disruption caused by bankruptcy could wreak havoc on their operations, Joe Alouf, a partner with Eaglepoint Advisors, a crisis management company that is partly owned by Kurt Salmon Associates.”

READ THE FULL STORY


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The future of promoting franchise opportunities – out with the old and in with the new, or revisit what worked years ago?

franchise brandsI strongly feel the days of promoting franchise opportunities through expensive trade shows and cost-prohibitive print advertising are rapidly becoming things of the past. Sure, franchising has experienced a great run and will most likely remain the backbone of small business. However, the current state of the economy has created a necessity to explore more cost-effective methods and processes in marketing franchise concepts as franchise growth objectives continue to be on the forefront of franchisors’ minds in the United States and abroad.

Besides being cost-effective, today’s franchise sales and development efforts must be technologically advanced to attract a more sophisticated, educated (and cautious) franchise candidate than the franchise industry has ever seen before. A trend that is sure to evolve as an increasing number of transitioning, highly-skilled and educated business professionals and corporate executives explore franchising as a career alternative while already successful street-smart entrepreneurs investigate franchising, perhaps for the first time, as part of their diversification and expansion strategies. All have embraced new technologies as a way of networking, sharing information, communicating ideas and exploring opportunities…including today and tomorrow’s franchise opportunities!

What are your thoughts about the future of trade shows? print advertising including brochures? new technologies that can be utilized in franchise development efforts? franchise brokers? in-house sales and marketing teams?


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