Breakfast Means Big Business

A report from Technomic Inc’s Menu Monitor service found that breakfast sandwiches appeared 8.1 percent more often on the menus of their Top 500 limited service restaurants in the first few months of 2013.  A separate study found that one-third of respondents eat a breakfast sandwich at least once per week.  This popularity could be why Popeyes is opting to venture into the breakfast game – at a single location to start.  According to the company, the breakfast menu will include grits, a country-friend steak biscut, a sausage, egg, and cheese, biscuit, as well as a couple of breakfast wraps.  Only time will tell if the franchise will elect to expand the offerings to their other locations, but it looks like breakfast is where it’s at for franchises in 2013.

Burger King Takes a Swing at McDonald’s

Burger King announced Tuesday that they will soon be releasing their very own rib sandwich – a not so subtle play off of the McDonald’s McRib sandwich.  Though McRib fans are fiercely loyal to the rib sandwich, it’s likely that the BK version will give the McRib a run for the money, especially since BK’s will be available at all of their locations all the time, as opposed to the McRib’s very limited releases to only a few select regions and for only short periods of time.  A McDonald’s spokesperson cryptically promised that the McRib will make an appearance sometime very soon.  We’re excited to see how this plays out.  May the best rib sandwich win!

Affordable Care Act Still Scares Franchises

 The Wall Street Journal reports that many small restaurant and franchise operators are scaling back their expansion plans because of uncertainty about the forthcoming expenses steaming from the new healthcare laws.  Though the law will undoubtedly affect franchisees’ bottom lines, it appear that some franchises don’t think it will be as devastating as originally expected.  Wendy’s originally estimated that it would cost the franchise $25,000 to comply with the regulations, but that number was recently revised down to $5,000 since they predict that many employees will decline the insurance.  How do you predict the healthcare law will affect business at your franchise?

Unlike the average small business, as I’m sure you know, most franchise concepts will operate on a fairly strict remodel schedule.  So, it’s likely your franchisor will require you to do at least a minor remodel every couple of years.  Though it may seem like a hassle, they’re actually doing you favor.  In fact, if you’re not up to your current brand standards, you may want to consider opting for the updates sooner rather than later, as the benefits to your bottom line and your image could potentially be huge.

“Most franchises can expect to see a significant increase in revenue immediately after a remodel,” says Kristen Morey of Direct Capital, a leading lender to franchisees. “It’s not just about appearances either, chances are the improvements will make your processes more efficient, which will wind up saving you money in the long run.”

These benefits can persist for some time, which means you’re likely to get back all the money you used to fund the remodel and a lot more besides. That’s easily the biggest benefit.

Before you jump and pick up the nearest hammer though, it’s important to plan for and consider every aspect of a remodel before you get swinging.  You’ll more than likely need to secure some financing first and foremost, so be sure to look for a lender with franchise experience, as they’ll know the ins and outs of the process better than most. Don’t forget to account for things like how long you’ll be closed and what you’ll do with employees while your doors are closed as well, since these relatively minor things can have a huge impact on your franchise.

Have you remodeled your franchise lately?

What is it?

The Franchise Rule is published by the Federal Trade Commission and outlines activities that are fraudulent or misleading within the American franchise industry. The main aim of the rule is to prevent the misselling of franchises. This is achieved by making all franchisors provide their potential franchisees with detailed information before any agreement is made.

What is a franchise agreement?

A franchise agreement typically provides a retail outlet for a franchisee that displays the trademarks and imagery of the franchisor’s business model. Some examples include fast-food restaurants, repair garages and convenience stores.

Why The Franchise Rule is in effect

Back in the 1970’s, misselling was rife. Many franchisees were being duped by scams involving high up-front costs and disappearing franchisors.  Following industry analysis by the Federal Trade Commission, the decision was made to introduce a regulation that protected the interests of franchisees. The FTC Franchise Rule was then introduced in 1979, and has so far been extremely effective in alleviating misselling and encouraging honest negotiation in business. The rest is history!

How you’re safeguarded

Under The Franchise Rule, each franchisor must disclose the following information to potential franchisees:

1)     The nature of their work and operational system

2)     Their financial integrity

3)     How much it costs to purchase and operate each franchise outlet

4)     All relevant terms and conditions

5)     Contact details for current franchisees (this is particularly valuable as you can get independent advice from them before signing up to anything!)
Penalties for offenders

The Franchise Rule is enforced by law and offenders are typically handed civil penalty actions in federal courts. These courts are authorized to impose up to $11,000 per violation.

All in all, The Franchise Rule is in effect for your protection! It safeguards you against scams and misselling, lets you understand the possible risks involved and clearly lays out what you are agreeing to when you sign up with a franchisor.

U.S. Franchisees Finding Lucrative Market In Middle East

The Middle East has not traditionally been seen as a huge growth market for franchisees, but over the last decade or so, that has changed. Dramatically.

Now, U.S. franchises are striking eastward, finding that the United Arab Emirates and Saudi Arabia have a seemingly boundless appetite for quick service food with an American taste. That’s thanks to growing wealth in the region and the fact that American franchises already in the area, such as Pizza Hut, are doing incredibly brisk business. It’s two-way demand.

Keep an eye on this lucrative market. We should be hearing more about it in the very near future.

Maine Franchise Bill Creates Controversy

In less pleasant news, there’s a fight brewing over a newly introduced franchise bill in Maine.

Critics, including the IFA, say the bill imposes too many restrictions on franchises and may even prevent them from doing business in the state. Supporters say the bill will protect franchisees from predatory franchisors attempting to take advantage of them and essentially give franchisees more freedom.

I’ve read the bill a few times today, and there’s merit to both these arguments. There are  a few unnecessary regulations in here, but I find it difficult to condemn my native state for seeking greater protections for franchisees. Perhaps the IFA and the state of Maine will meet in the middle here, but I’m dubious of that.

It will be interesting to see how this plays out.

Fast Casual Takes Over France

While we’re casting our eyes abroad, it’s worth looking at news out of France, where fast casual restaurant sales have actually surpassed sit-down restaurants. Given France’s reputation as the beating heart of the sit-down restaurant world, this is pretty impressive.

It’s also proof positive that fast casual concepts can and will take over anywhere they’re placed.

Franchise agreements have expiration dates written into the paperwork. When the agreement ends, it’s not uncommon for a franchisee to continue to operate using the registered trademark and dress of the franchiser while the two parties negotiate the terms of the new agreement. This decision making period can last for weeks, and the longer that the franchisee operates without an agreement in place, the more potential for loss the franchisor could be exposed to.

Whenever a franchisee and a franchisor enter into a franchise agreement, there are protections included in the contract that are legally binding and require the franchisee to perform up to certain standards if they wish to use the trademark and dress of the franchise. During the period of post-termination negotiating limbo, the franchisor may want to consider the following solutions as a way to reduce the possibility of legal fees and time in court:

•  Documented acknowledgment of the post-termination negotiation period, relating to the use of trademark and dress.
• A limited time period in which the franchisee can continue to use trademarked signage, containers, and products, as well as dress.
• Reinforcement of the franchisor’s right to control trademark usage and standards.

Franchisors need to keep control of their registered trademarks and dress, but it may be unreasonable to request that a franchisee completely halt operations until a negotiation can be reached. Likewise, franchisees must continue to respect the wishes of the franchisor so long as they do business under a trademarked name.

The need to address this matter arises from not only the situation at hand, but in all future negotiations with franchisees when entering the post-termination negotiation period. By acknowledging the franchisee’s obligation to the franchisor, it is possible to continue negotiations in good faith while allowing the franchisee to continue operation. A time sensitive period of two weeks is recommended as the baseline for operation during negotiation, but this amount of time can be shortened or lengthened at the discretion of the franchisor. The franchisor must protect their rights during these periods, as anything less could signal future franchisees to flaunt their obligation and their legal position.

I often review legal cases as part of my blog.  Cases are real life examples of what happens.  Cases can provide a wealth of insight for both franchisors and franchisees.  Today, I am reviewing a case with many franchise relationship do’s and don’ts.

• Do engage with franchisees in times of dispute
• Do Investigate before taking action
• Don’t disregard state laws
• Don’t cut franchisees off from the system
• Do be consistent
• Don’t wait to address an issue

The case is Budget Blinds Inc. v. Josh James LeClair.  LeClair was a Budget Blinds’ franchisee.  LeClair had entered into an informal agreement with his fellow adjacent franchisee, Morris.  The two franchisees agreed that each could do business in the other territory if they had an existing relationship with the customer.

LeClair also worked in an add-on to his franchise business.  Not only would the franchise sell blinds, he introduced a side business where he would clean and repair blinds.  LeClair called this the Window Valet.  LeClair first told the franchisor about his Window Valet in 2009, it was not an authorized service under the franchise agreement.  But Budget Blinds did not object.  They did not initially object, until 2011.

Four years after the agreement between Morris and LeClair, Morris got mad and reported LeClair to Budget Blinds.  Budget Blinds sent LeClair a notice of termination, cut LeClair out of Budget Blinds’ proprietary software and dropped LeClair from the Budget Blinds’ website.  LeClair tried to talk with Budget Blinds, but is met with “go talk with our attorney” response.

LeClair moved for arbitration.  The arbitrator listened to LeClair.  The arbitrator found that Budget Blind constructively terminated LeClair without good cause under Wisconsin law and awarded LeClair $275,000.  The arbitrator said Budget Blind did not have good cause to ignore and not engage with LeClair.  Budget Blind did not have good cause to cut LeClair out of the website and proprietary software without notice.  Budget Blind did not have good cause to terminate LeClair for transgressions that had been on-going for 2 and 4 years.  Budget Blind did not have good cause to terminate LeClair for offering services outside of this territory when others including Morris were doing the same.  And the court agreed with the arbitrator.

Lesson from the Court:  Stop, look, and listen!

Does your franchise have a procedure or forum in place to hear and investigate franchisee complaints?  If so, we want to hear about it!

Maybe you have heard or may have even seen an episode or two of a tv show called Undercover Boss. The premise of the show is to take a company CEO, CMO or CFO and place them in a position where he or she does some of the day to day activities within their business or franchise. Now, here’s where it gets interesting. This is where we find out if franchisors truly have a clear connection with their franchisees and more importantly their customers.

Like in the show franchisors should think about social media as part of the day to day activities. Aside from their storefronts or business locations, this is where their target audience is interacting. I think most franchisors would like a central hub where they could attend to each and every customer while maintaining local presence. Well, they can. With social media and local geo targeted websites. But let’s talk social media.

A Little Birdie Told Me.

Twitter is not just so that you can find out what Justin Beiber did this morning it’s also a wonderful tool to spread information about your franchise. You can publish information that appeals to both your franchisees and customers. For example did you just sign on another location? Great tweet about it! Let your customers now that there may be a closer option to them. You are also letting your franchisees know that the franchise is growing. A centralized Twitter account helps you stay in control as a franchisor. Yo control what you relay as news or updates and it helps keep down the need to create alternate or rogue accounts by your franchisees.

What, You don’t know who Mark Zuckerberg is?

This one is a bit tougher. Mainly because most franchisees take it upon themselves to create personal FB accounts or pages. So you may not really not know what people are saying about your business. Since, this is open to the most rogue page creation there is more legwork that needs to be done here. Here’s a few tips on how to go about centralizing your Facebook page. Create a page that will be used for all franchises. Research any rogue pages and let facebook know that they are not part of your business and they will review for deletion. Reporting and infringement or violation.

Yelp Angie About Your Hotfrog.

In local listing and review sites you will find folks talking about your services or products. They can range from positive rave reviews to some pretty bad complaints. But are you in the loop? Do you know what’s going on? Many times franchisees set up local listings whether they be for SEO purposes or to connect with customers. This leaves plenty of room for a large number of local listings that you are not tracking depending on the number of franchises you may have. So this is probably where the biggest disconnect is. Just like in the tv show the higher ups sometimes don’t have a clue of what is going on at the local level. So what do you do? Some real work is required here. Do an extensive search for all of your locations in the major local directories like Yelp, Angie’s List, Hotfrog etc. Address any immediate issues and then collaborate with your franchisees so that you can get a grasp on your franchises local listings.

Rounded Up and Under Control

Ok, now that you have rounded up all of your social media outlets and are under control. You need to start sharing this information across multiple websites. Now depending on the number of franchises you have this can be anywhere from 20 up to the thousands in websites. How do you make sure everyone is sharing the same information?  There are a few alternatives that are both cloud based and server based. If you are technically inclined and know about servers and code you can go with WPMU. Now if you don’t have that technical know how or are strapped for time there is a cloud based cms alternative for franchises by the name of Empowerkit. With their Facebook, Twitter and Yelp apps you can easily install them from the admin panel and publish them to as many sites as you’d like. You now have a centralized feed that is published across multiple sites.

Stay In Touch and Connected

It’s no longer acceptable for businesses to be out of touch with their collaborators and their customers. You need to stay in touch and be connected at all times (or at least the most time possible) If you follow the Twitter, Facebook and local listing sites tips I laid out for you. You have a better opportunity of addressing any potential issues and also grow your customer base by staying in touch.
If you found this article helpful please feel free to Tweet it, Like it, Share it, or Pin it!

Mobile POS Systems Are The Way Of The Future

If eThor has their way, anyways.

The ability to swipe credit cards via smartphone is especially popular these days, but at least one company is trying to take that concept much further. The company, which just received a fresh round of funding, wants to offer online and off-line access to POS systems via mobile devices and allow customers to more

For the fast-paced franchise restaurants of America, this is good news. The ability to take an actual POS system on the go would be revolutionary, and if eThor can get us there, we’re very much on board.

Denny’s Has Stellar Q1 Growth

If you needed evidence that it’s a pretty good time to be a franchise restaurtant once more, look at what Denny’s has been up to.

The popular chain with the affordable meals grew a robust 20% in Q1, led by growth in demand and smart investments from Denny’s corporate headquarters. The company has been rolling out new menu items with regularity, as well, which has led to heightened customer interest.

With consumers starting to open up their wallets and affordable restaurants remaining as popular as ever, it’s a good time to be a franchisee in that space.

Franchises Help Veterans. Period.

Our friends at the International Franchise Association were recently lauded for helping out veterans. The IFA has been publicizing and pushing to get veterans jobs are franchisees, which are ideally suited to the skills they pick up from time spent in the military.

The White House recognized the work of the IFA and corporations in hiring and training veterans, something we will always wholeheartedly support. Kudos to all!

Have you or your spouse ever thought about going into business together?  How about buying a franchise?  Did you plan for the ‘what ifs’?  What if the marriage ended in divorce?  What if the franchise business was not profitable?  Would the debts of the franchise outlast the life of the marriage?

The answer to that question had an unexpected and unfavorable outcome for one husband.  The case is Curves for Women Angola an Indiana Partnership, Dan Cole, and Lori Cole v. Flying CAT, LLC.  In this case Dan and Lori, at the time husband and wife, entered into a lease with Flying CAT for the operation of a Curves franchise.  The Coles never formed a business entity.  Both signed the lease as “owners” of the franchise business.  Dan paid the first 6 months’ rent.  Lori handled the day-to-day operations of the Curves franchise.  Dan handled the accounting.  In September of 2004 the Coles, late but without incident, exercised their first right of renewal under the lease.

As the story goes, Lori Coles filed for dissolution of her marriage to Dan Cole in May of 2007, but never informed the landlord.  In January 2007, the rent payments were beyond  $21,641.55.  In January of 2008, Lori Cole, absent Dan Cole, sent notice of a second renewal of the lease and again did not tell the landlord, Flying CAT, of her marriage dissolution proceeding against Dan Cole.

The court held that Dan was liable for the monies owned under the lease even though Dan and Lori dissolved their marriage.  The court reasoned that during the marriage, Dan and Lori shared the profits of the Curves franchise; therefore they were a partnership.  Lori renewed the lease under the auspices of the partnership beyond the marriage.  Dan did not instruct her otherwise and he did not inform the landlord of the dissolution.  The result- Dan remained liable under the lease and liable for the back rent even though the marriage was dissolved.

At the time of divorce, it is important that franchisees look to state laws to dissolve not only the marriage, but the business relationship.

Following the recent tragedy in Boston, one Buffalo Wild Wings franchisee, all the way in Southern California, announced that he would donate one dollar from every chocolate fudge cake purchased between April 16 and April 23 to the American Red Cross of Eastern Massachusetts.  Dunkin’ Donuts corporate announced that it would donate $100,000 to The One Fund Boston to support those impacted by the bombings.

Of course, it doesn’t have to be to an event with nationwide attention and you don’t have to give away the farm to make an impact.  You’d be surprised what you can accomplish with a relatively modest amount of money and time.

Here are some big reasons to participate in franchise charity:

You help out.  This is obviously the biggest reason.  There are people out there that need your help and if you are able to make a difference in someone’s life, then why should you not act on it?

It’s great free publicity.  Your quest for PR should always come secondary to doing genuine good for your community, but being able to attach your business name to a great cause or organization certainly doesn’t hurt.  Your customers will feel good to know that your franchise cares about more than just business.

It’ll do wonders for your employee morale.  It’s no secret that many franchises have a high employee turnover rate.  Regularly participating in charity will help to establish a solid foundation for your franchise’s core values and help to raise your employee morale by giving them another reason to feel great about working for you.   

It’s always worth doing some research before choosing a charity to which to donate, after all there may be some great non-profits out there that you may have never heard of.

How does your franchise help your local community?