A proven success formula?
In these times of malaise and tentative recovery, it is of course also grating and hinged in the franchise world. In addition to the loss of chains and reorganisations, the current juncture also offers opportunities for new possibilities. New initiatives are emerging here and there, most of which should be welcomed. This offers opportunities for starting franchisees. However, you should count to ten before embracing a new adventure.
After all, the new initiatives must have already proven themselves in practice, which is an essential feature of any franchise formula. The franchisor must have successfully applied the concept offered for a reasonable period of time before starting a franchise organization. The European Code of Honor on franchising therefore sets this requirement.
If there is a so-called pilot location, then the prospective franchisee would be wise to ask for all relevant information that is important. This includes, for example, the provision of available figures. It should also be investigated whether the alleged success of the pilot location can be duplicated in the location of the intended franchisee.
A thorough site investigation is necessary for this. Each franchisor must at least commit to the results of the location survey and the financial prognosis derived therefrom for a series of years for the benefit of the franchisee. In addition, matters such as a detailed franchise agreement, including a clear overview of all financial obligations and a completed manual, must be present. An alert candidate franchisee will also ask for insight into the financial status of the candidate franchisor. Usually this is not provided. Nevertheless, the prospective franchisee would be wise, within the limited space that is usually offered to him in this respect, to convince himself that the prospective franchisor is financially sound enough to enable the obligations towards the franchisee to be met on a lasting basis. The possible growth strategy must also be known to the prospective franchisee. Here, too, it must be considered whether the franchisor can actually meet these requirements.
Conversations with any existing (new) franchisees can of course also provide a lot of useful information.
Also in these times applies: Look before you leap.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Article Franchiseplus: “Franchisors participate in franchisees” – dated June 3, 2020 – mr. AW Dolphin
Franchisors are increasingly participating in the franchisee's business. There are several benefits for both the franchisee and the franchisor.
Article The National Franchise Guide – “Corona discount on rent” – dated June 2, 2020 – mr. AW Dolphin
If a rental property is obliged to be closed due to corona, there may be a right to a rent reduction, according to the Northern Netherlands court.
Article Franchise+ – Franchisees enjoy the same protection as employees and commercial agents with regard to a non-competition clause – dated 7 May 2020 – mr. RCWL Albers
It often happens that, especially by franchisees, the validity of a post-contractual non-compete clause is considered too lightly.
The support agreement for the Retail sector in this Corona crisis – dated 15 April 2020 – mr. K. Bastian
On April 10, 2020, the Ministry of Economic Affairs, together with a number of landlords, retailers and banks, reached a support agreement.
Court rules that corona crisis does not constitute force majeure – dated April 10, 2020 – mr. AW Dolphin
If payment cannot be made due to a decrease in income, then there is not always a force majeure situation.
Important information for directors of franchisees associations: Online meetings and decision-making in times of corona – dated April 10, 2020 – mr. J. Strong
Emergency law provisions for legally valid decisions without physically meeting within the association structure.