You, the franchisee, are in a jam. The franchisor promised support, which you desperately need because you have little experience in this particular franchise industry, or in business at all. You took early retirement with a decent package and decided that opening a franchise was a good investment of money and time. The franchise representative convinced you that they would be there to give you the technical and business support you required to be successful. However, now that you are a year into the franchise, the franchisor is starting to pull back on the support. What do you do?
This is a difficult situation and may involve either legal or franchise consulting intervention. Which way do you go?
I do not normally discourage new clients, but I believe it is important for you, the franchisee, to understand that seeking the assistance of a franchise consultant may be a better use of your money and time. Initially, you must determine whether there has been a clear breach of the franchise agreement, relative to the franchisor’s representations and express obligations to you. If there are violations of the terms, then you should consult an attorney knowledgeable of franchise law.
Consider Contacting a Franchise Consultant
If your due diligence on the legal side fails to turn-up violations of contract terms, then consider contacting a franchise consultant. The reason? Often the franchisee comes into the relationship with an unclear understanding of the franchisor’s obligations. Know that the franchisor does not have unlimited resources to provide support for its franchisees. Based on industry experience, the franchisor knows how much start-up assistance is generally required to launch a new franchise in your territory; and after this period of time, the franchisee is expected to have sufficient experience with the franchise system and business metrics to venture forth into the market place with limited support from the franchisor.
Here then is the rub: You, the franchisee, require hands-on support for a longer period of time than what the franchisor is willing, required or able to provide. When these expectations become miss-aligned, the franchise consultant can fill the “need void” and provide you with the expertise you need, and for as long as you need it.
Further, consider that franchisors may provide less support in the future. In another blog article where I wrote about franchisor control issues (http://kilcommonslaw.com/franchise/the-franchisors-dilemma-to-control-or-not-to-control/) , I reported that the National Labor Relations Board’s general counsel issued a ruling finding that McDonald’s was to be considered a “joint employer” together with its 14,000 franchisees concerning all the franchisees' employees. This ruling may prove to be a seismic shift in the traditional responsibility of franchisors, and one that will likely be litigated for years. The impact to franchisees may well be that franchisors offer even less support. Consider the NLRB’s decision’s affect from this perspective: the less support provided, the less likelihood franchisors will be deemed so controlling that they assume obligations which traditionally the courts have ruled to be the responsibility of the franchisee. This responsibility demarcation line between franchisee and franchisor is critical if the franchise model is to continue to thrive in the marketplace.
Therefore, should the franchisor curtail its support even sooner than before, due to threat of government intervention and added responsibilities, franchisees may have an even greater need for the consultants to assist them through the start-up phase of their business.
If this is the situation you find yourself in, then consider seeking the assistance of a franchise consultant.
BE ADVISED that these comments are not intended as legal opinions and are not to be relied upon as legal advice. If you need legal advice, or a referral to a business consultant, please contact us to discuss the specifics of your franchise business.
© KilcommonsLaw, P.C. 2015