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Log In / Register | May 24, 2013

Expert Advice

Franchise Review Report Released: Good Faith and Penalties Recommended

Australia | simon young | May 17 | franchising, legal
The Report by Mr Alan Wein (from his Review of the Australian Franchising Code of Conduct conducted earlier this year) has been released today and makes 18 recommendations for improving the franchise sector. A copy of the report can be accessed through the Department of Innovation website. The Report’s recommendations can be summarised as follows (with significant changes emphasised in bold): Where a franchisor is willing to offer a further term a Disclosure Document (which presumably would include a copy of the proposed franchise agreement) must be sent with a Notice under clause 20A; Streamlining the Disclosure requirements for Master or overseas based franchisors by reducing the scope of disclosure of the master franchise arrangements; Including specific disclosure...
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Should I Franchise My Business?

Expert | Mario Herman | May 14 | franchising
If you own a business, you may have considered expanding by franchising. Other companies have found success through franchising, so why couldn't you? Before making any decisions, it is important to understand what franchising would mean for your business. Once you are aware of the pros and cons, you can make an informed decision about whether franchising is right for your business.  First, let's discuss the potential benefits of expanding your business through franchising. One of the aspects of franchising that many business owners find enticing is the fact that it can be an inexpensive way to grow. Most business don't have to spend too much to open new locations since franchisees generally buy the locations, and the right business tactics can net high profits. ...
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Submissions to Latest Australian Inquiry Now Available

Australia | simon young | Apr 15 | franchising, legal
73 submissions that have been made to the Wein inquiry from a wide range of the franchise spectrum, including individuals, corporations, lawyers and academics, are now available on-line through the followng link:  http://www.innovation.gov.au/SmallBusiness/CodesOfConduct/Pages/Submissions-made-to-the-2013-review-of-the-Franchising-Code-of-Conduct.aspx It is unclear when the final report will be handed down and it is believed that discussions about potential recommendations remain ongoing. Of the issues addressed by the inquiry by far the most controversial is the possible introduction of good faith as a statutory obligation in franchising relationships, although the definition and parameters that might apply are no clearer now than before the inquiry began....
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Franchisee Advocate to Testify Before the California Senate Judiciary Committee

Expert | Robert Purvin | Apr 11 | franchising, legal
The American Association of Franchisees and Dealers (AAFD) has signed on as a co-sponsor of California Senate Bill SB610, fair franchising legislation pending in the California legislature. I have been asked to testify in support of the bill at upcoming Senate Judiciary Committee hearings scheduled for Tuesday, April 16. SB610, introduced by Senator Hannah-Beth Jackson (D-Dist 19), would create an affirmative duty of good faith and fair dealing in franchise relationships and reinforce the right of franchisees to join and participate in franchisee associations.  The bill also provides franchisees the right to sue if they believe their franchisor has not acted in good faith with regard to franchise sales, renewals, transfers and terminations. Although the AAFD was not involved...
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Teen Turns to Franchising for Growth

Expert | Mario Herman | Apr 9 | franchising
Whether you live in the Washington D.C. area or elsewhere, starting up a business is exciting but challenging at times. It is important that people looking to embark on a new business venture take the time to consider what is best for them. For some, franchising is the best option. Many people who buy a franchise have years of business experience. However, one 17-year-old in a nearby state shows that age is not always a limitation when it comes to owning a business. The Rhode Island teenager grew his landscaping business, and he is now a part of the Weed Man of North America franchise. He decided to get into the franchising industry because the Weed Man model would help him increase profits and efficiencies. Understanding the basics of franchise law is important for people interested in...
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Franchisors, Negotiate Agreements Up Front or Risk Repaying Later

Expert | Bob Snelling | Feb 21 | franchising
Franchisors that elect not to negotiate franchise agreements up front with franchisees run the risk of negotiating contracts forever. "You can pay me now or you can pay me later." A key to successful personal and professional relationships is saying hello and goodbye with equal aplomb. Franchise relationships however, typically start off lopsided and terminations rarely receive much fanfare. Franchisors that do not embrace negotiation prior to agreement signing fail to improve upon this dichotomy. Independent business owners freely engage in negotiation when establishing relationships and contractual agreements. Generally, the greater the value or complexity of business dealings, the more apt negotiation is to be employed in the process. Negotiation has thus earned...
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Lessons for Kumon: Building Consensus the Japanese Way

Reporter | Don Sniegowski | Feb 12 | franchising, service
Akio Tsunoda, president of the Japanese holding company, Kumon Institute of Education Co., told a global management forum back in 2010 about its franchise services to its learning center owners. "I think our overseas operations are supported by our know-how, which is easily adopted in any country." Given that Kumon has 26,000 franchised and company centers in 46 countries, it is surprising that the firm only has 34 Japanese nationals working overseas. Tsunoda later told the chain's worldwide franchisees in a conference that its founder Toru Kumon valued a learning organization. But Kumon North America is having difficulty building consensus with its learning center owners and among its own staff. Chief Operating Officer Savio Rebelo resigned last week...
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The Days of High Upfront International License Fees Are Over

Expert | Ed Teixeira | Feb 8 | franchising, trends
A number of years ago certain franchisors that franchised internationally had a practice of trying to get the highest licensing fee as possible upfront. The justification for this practice was based upon several factors: The initial licensing fee was seen by the franchisor as primarily a profit generator rather than as reimbursement for related present and future franchisor expenses, costs of training, franchise system value and development costs. Franchisors were fearful of not receiving future royalty payments and felt that a higher upfront license fee could serve as a form of insurance if this happened. Fear of costly litigation in a foreign country was a related issue.  Some franchisors preferred receiving a higher licensing fee in lieu of...
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Remembering Pioneer Tom Murphy of Continental Franchise Review

Reporter | Janet Sparks | Jan 28 | franchising, people
Franchise consultant and founder of the Continental Franchise Review newsletter Tom Murphy died a week ago last Saturday at age 93, after a short illness. Having known Tom for almost 30 years, I seldom imagined a time that he would no longer be a part of my life in franchising.Two days before he passed away, he called from the hospital to plan our next get-together for lunch, a regular occasion we looked forward to. When Tom started the Continental Franchise Review (CFR), published from 1968 to 1999, there was a desperate need for a reliable publication that could report the news boldly, without concern of offending those in the franchise community. Franchising in the 1960s was considered to be the Wild, Wild West. There was no regulation nor watchdog groups looking over franchisors...
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Understanding Item 20 of a Franchise Disclosure Document

Expert | W Michael Garner | Jan 18 | franchising
If you're thinking about purchasing a franchise, pay close attention to the franchise disclosure document (FDD)—the large document that contains disclosures about the franchisor and franchise system.  Item 20 of the document can seem daunting, but be sure to dig in and examine the information it contains. This section is made up of five tables that show the status of outlets within the system over the past three years. Table 1: History of system outlets Table 1 summarizes the history of system outlets over the past three years. It shows the number of franchised outlets, the number of company-owned outlets, and the number of total outlets. This chart is important because you can see if the franchise is growing or declining. Table 2: Transfers Table 2 shows the...
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