Episode Transcript
WEBVTT
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It's time for another episode the Franchise
Business Radio Show, broadcasting live for the
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pro business channel studios in Atlanta,
sponsored by franchise intellect. Knowledge of the
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franchise community for franchise selection. More
Info at franchise intellectcom, also made possible
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in part by franchise dot city,
a better way to buy a franchise.
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More Info at franchise dot city.
And France, serve the world's largest franchise
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consulting and expansion organization. More Info
at Frand servecom. Now here's your host,
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certified franchise consultant, Pamela Curry.
Good Day, this is Pamola Curry,
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franchise consultant for aspiring entrepreneurs looking to
find a franchise that aligns for them
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and host of the Franchise Business Radio
Show. The Franchise Business Radio show was
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founded to be a platform to bring
business professionals together to connect, educate and
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collaborate to serve the franchise community and
those considering franchise ownership. Today, as
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a guest, we have a longtime
professional friend and Franchise Attorney Tom Branch in
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the studio to discuss franchise law.
Tom Welcome back to the franchise business radio
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show. Thank you for having me. Great to be here. I am
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great to be back in the studio
right as many don't know, franchise law
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is actually very specialized and I'd like
to share with our listeners a little bit
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about your background. Tom Branch has
been in private practice since one thousand nineteen
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eighty, after graduating from the University
of Georgia School of law. He received
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his undergraduate degree from emery university in
one thousand nine hundred and seventy five,
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graduating with high honors. Tom Is
also a member of the American and Atlanta
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Bar Associations, as well as the
State Bar of Georgia. He is a
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member of the American Bar Association Forum
on Franchising. He was co founder of
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the Southeast Franchise Forum, which I
didn't know that, Tom, that was
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new news to me. It was
a long time ago, but yeah,
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it's worked out very well and and
you're also co found founder of the Atlanta
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Bar Association Franchise Law Committee. Tom
Has served on the board of directors of
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the Atlanta Bar Association and served as
a board member and a chairman of the
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board of the Atlanta Bar Association Soul
Practitioner and small firm section. He was
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the author of Franchising in Georgia in
the Georgia State Bar Journal November one thousand
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nine hundred and eighty seven, and
Tom is by far a trusted legal advisor
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to a diverse range of clients in
the franchise community, including Franchise Ors,
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Franchise's and those who are considering a
franchise and would like to understand that franchise
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disclosure document and receive legal counsel before
signing a franchise agreement. Tom I'd like
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to start off with some basics and
then discuss some more mature topics, but
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it him it comes to franchise law. To kick start us off, we
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would you please just provide an overview
of franchise regulation in the US. Well,
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there is a lot of regulation.
That's the bad news. The good
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news is it hasn't really change materially
in the last couple of decades. Franchising
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is regulated both by the Federal Government
and at the state level. On the
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federal level, since one thousand nine
hundred and seventy nine, federal trade commission
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regulates the sale of Franchising. So
it's regulations deal with the sale part,
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and of course that's a national rule
so it applies everywhere. Then there are
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state statutes. There are fourteen states
so called registration states, that say that
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if you Mr Franchise or want to
sell in our state, then you have
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to register with US first. And
those run the Gammut from one where you
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just sent them a check and a
cover letter to most of them where they
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do a review. There's an examine
or who looks through the FDD and oftentimes
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we'll come back to you and say, well, change this or add that
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or you know, something like that. So you know there's that process.
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There are also state laws, generally
called relationship laws, that get into the
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circumstances or limitations in which the franchise
or might terminate a franchise or refuse to
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renew one. And and and part
of the regulation is the franchise disclosure document,
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and you know that is legal document
that a franchise or has to disclose
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to any perspective, franchise's. Could
you talk to us a little bit more
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about that franchise disclosure document and the
layout of it? Yeah, the franchise
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disclosure document is mandated by the Federal
Trade Commission rule and the idea is that
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before the rule it was felt that
franchise ease or prospects either didn't get any
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information, they got information that wasn't
helpful or, in some cases got information
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that was just false. And so
the the disclosure document has they've tinkered with
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it over the years, but it
basically is designed to to tell a buyer
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about the franchise company, about the
brand and about the deal. What does
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it cost? How much is it
going to cost open, you know,
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and then about the brand. How
are they doing? or they growing or
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shrinking? Do they have a lot
of turnover? And then, of course
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the question. We may talk about
this later, but you know, how
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much might expect to make by this? That's what people always want to know.
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Of course it gets into all of
that. That makes great sense.
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And and before it was called the
franchise disclosure document. That will show our
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age. Her Time it was referred
to as UFOC and I still have people
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call and say I want to franchise
and I want you to create the U
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fowks. Yeah, that's that's that's
kind of old, but sure. And
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UFOC sort of stood for uniform franchise
offerings circular. Yeah, and and they're.
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That kind of made sense to me
because it really is laid out as
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it's a uniform format, and the
FDD is uniform form. Yes, yeah,
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so, I mean we called the
FDD, but I kind of like
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that uniformed word, I guess right. And offering circular is like securities offerings
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or use those terms. Makes Sense. So that's that made sense from that
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standpoint. So I do know with
this the franchise just gooeser document, which
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does have sort of a uniformed layout
if you look at different ones. The
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table of contents basically are giving you
an outlines, give you a tip on
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twenty three specific items plus exhibits.
Could you kind of walk us through what
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that layout looks like? And when
someone is, just say, initially receiving
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that document, it can seem a
little bit overwhelming, so if we break
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it down for him that might help. Well, first of all, it's
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worth saying that the the FDD itself, it has exhibits which would include the
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franchise agreement, and that is a
legal contract and that's that has a fair
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amount of legal lease. Frankly,
in the fded itself a disclosure part is
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supposed to be written in plain English. Yes, so, I mean it
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sounds small, but rather than saying
franchise or in Franchise Z uses you and
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we we are obligated to do this. You are obligated to do that,
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which should be helpful. So,
as you mentioned in the opening, it's
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very important that people at least attempt
to read that part of it. They
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may need help with the with the
agreement because of the legal terminology, but
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just getting the UF getting the FDD. First of all, look to see
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the issuance date of that document is
on the cover and it's amazing to me
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how many people come to me and
they've got one that's at least a year
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old. Had One. The others
two years old and you know, I
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look at it but it's you know, things have changed in the last two
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years, as we all know right. But it starts off with a little
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history of a franchise or how long
they've been around in the brand, how
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long is the brand been around,
and a description of the of the business,
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because increasingly we get into service businesses
that or even product businesses that,
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you know, for many of us
it's not real or not going to be
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familiar with it. Sure, and
you know what is this. How do
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who were your customers? How does
this work? So a little bit about
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that. You list the officers and
director of the franchise or so. Who
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are those people? How long have
they been there? And then any litigation
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or bankruptcy history on the franchise company
or those people. And some people will
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have, some companies will have a
fair amount and quite often there's none.
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And then you get into the next
few items deal with the sort of financial
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part of the deal. What's the
upfront payment for the franchise fee it?
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Are there any other payments? Do
you have to buy your startup inventory from
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an affiliate, something like that?
It's that would be due on signing.
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You know that kind of thing.
And then ongoing fees about the royalty advertising
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technology is something you see more and
more. A monthly technology. That is
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that renewal, transfer fees of things
should be in there. And then a
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very important item, item seven,
is what's it going to cost me to
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get this thing open and operate for
some sort of reasonable start up period?
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And it's usually a range, and
that range actually is on the cover page.
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So you know before you get two
paragraphs into the document, you can
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see that this is a business that's
going to cost me a couple hundred thousand
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dollars to get open or you know
whatever. So that would it's this is
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more your area than mine, but
that would probably disqualify or qualify a lot
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of candidates based on what their net
worth might be. So you get into
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those things. And then there are
some sections on what are the obligations of
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the franchise or with respect to training
and site location, that kind of thing.
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How quickly does the franchise have to
get the business open? Is always
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very important. And then talk about
territory. Does the franchise you get an
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exclusive territory? That's gotten to be
something more and more complicated because of Internet
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and other means of selling products.
Sure it makes sense. Yeah, trademarks.
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Does the franchise or have a federally
registered trademark? You think they would,
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but often they don't. And then
the two really big things that I
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look for look at pretty closely items
nineteen in two thousand and nineteen. Is
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the franchise or do does not have
to give information about how the stores are
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doing? And historically most franchise ors
didn't give any information because they risk of
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verse and nobody's going to sue them
if they don't give but more and more
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people do. You've probably seen that. Yeah, and in some industries it's
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the norm. I represent a couple
of home cleaning businesses. Will just about
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everybody in that business gives that information. That's so, if you don't,
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you're a competitive disadvantage. Makes Sense
and just time to be sure our listeners
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are. That's what we refer it's
often referred to as the item nineteen and
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that's an important item in the franchise
disclosure document. That's represent a financial performance
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representation. Are What we used to
call earnings claims. That's right, and
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you'd be amazed at how many franchise
ors have that information. And it's bad,
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you know, just bad. You
know the half of the franchise.
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He's that are reporting or doing under
a hundred and ten thousand a year and
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Breaking Mirror, maybe breaking even.
But it's in there. So that's good
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rather at right. I'd rather read
it and know now then find out later.
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So that's an important item. And
then the next item, I'm twenty,
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has tables that give their franchising history. So are they growing? Where
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they growing? So sometime you'll get
a look at a franchise and it's from
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they'll have their growing but they're in
California and that's where all their franchise these
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are. And you're looking to go
to Albany, Georgia, you know,
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with some fruit drink concept. You
know, maybe, you know, maybe
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not right, but that's that's really
an important item. Yeah, and then
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their exhibits. Course, franchise agreement
is one, but the financial statements of
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the franchise or is in there and
those are audited pretty well. Rely on
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what's in there and you know,
you want to know is a buyer?
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Is this company likely to be here
and a year or two? And I'm
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not an accountant, but you know, you look, do they have some
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horrible note payable you know that's going
to be due at the end of the
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year, or they losing money every
year? Right kind of thing. Or
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and more franchise brands our own by
venture capital type groups, equal private equity
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grasp. I've been saying a lot
of that. Financials. Maybe consolidate.
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It may be hard to follow all
of that, but at least it's there.
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And do is there any reason to
think that the franchise or is going
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to be struggling financially. Yeah,
so a lot, a lot of great
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date in the franchise disclosure document.
And is it? Is it accurate for
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me to say that when you receive
the franchise disclose your document, you'll notice
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that table of contents. It's going
to disclose you on twenty three specific items.
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So the first half of that FDD
is written in non legal Charkin to
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give you a date on those twenty
three items. Then you have all of
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the exhibits and, like you said, you have the franchise, the actual
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franchise a cream, which is the
contractual agreement that a signed between the franchise
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or and the prospective franchise z but
that is written in legal he's, like
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you said. So it's almost like
you're getting the same information twice. The
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first half is a non legal jargon
and the actually the in contract, which
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is what you're signing on. That's
right. And a fair amount of the
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FDD is a description of what's in
the contract. MMM So, I mean
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contract fleshes it out. But yes, you know what what are the advertising
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requirements and you know that sort of
thing. So I want to kind of
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go back to a couple of the
items that are obviously provided in the franchise
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disclosure document. You discuss the you
know, items five, six and seven,
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which are more around the explanation of
the different fees, which you explained
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elegantly, seven being a very important
one, because what's that estimated initial investment
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to get that business off the ground
and up and running. But a very
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common fee that is obviously there,
is how the franchise or makes money and
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that's the royalty fee. What is
I mean? Do you have any thoughts
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or opinions between a fixed flat royalty
versus percentage royalty or a minimum royalty?
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I mean, what do you see
from a legal standpoint? I don't see
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a lot of flat royalties anymore.
Used to see that occasionally, M and
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when I see a minimum usually it's
it's a business where that's really designed by
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the franchise or to make sure if
you're not doing anything, you're not doing
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any business. Have a home cleaning
business, franchise or and they have that.
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Yeah, so you've got to pay
something your whole you're holding a territory
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at that we could be selling to
somebody else. So yeah, it's a
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seven percent royalty, but you have
a minimum. HMM. And if you
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don't pay the minimum, then you
know your subject determination and that percentage royalty
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is typically are almost always on gross
sales. Yes, yeah, the only
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exclusion is sales tax. But yes, because they're not going to let you,
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let the franchise he tinker with the
their expenses, and you know we
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have high labor so I'm not there's
no royalty this month. It's always.
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It's always on gross let makes sense. And another really important item. I
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know it's they're all important. All
of the provisions are important. You want
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to read it in its entirety,
but I'd like to talk a little bit
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about territory, and I know that
is very driven by the type of business
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model it is but, like you
said, it's things are shifting now with
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e commerce and everything else to can
plays touch. Talk to us a little
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bit about what you see from territory
definition. Yeah, you do in the
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FDED when you file, I've learned
the hard way, when you file with
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these registration states, you have to
say whether that's an exclusive territory or not.
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And and that's exclusive is the word
they're looking for, not protected or
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special, you know, or something
that. Do you have any if you
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don't say you have an exclusive territory, then presumption is you don't, and
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there's some disclaimer language that has to
go in. But yeah, it really
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depends a lot on the on the
what it is that the business is about.
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And even if it is, even
if there is an exclusive territory,
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the question I always have if I'm
representing the buyer is okay, so I
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have. I've been given Cobb county, Georgia, where we are. I
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guess what, if there's nobody in
Fulton County next to me, can I
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go provide services there? I'm not
infringing on anybody right and a lot of
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times that graements don't really say anything
about that. So if you're if you're
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either it's a new brand or you're
sort of a pioneer and an area,
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graphical area, that's something that you'd
want to clarify. And in terms of
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maybe an a dendum, you're not
really asking anybody to change anything because it
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hadn't been addressed. But you know, how does that work? Yes,
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and a lot of the businesses that
I represent franchise orse they really don't have
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national accounts because of the nature of
the business. But I'm doing some work
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now for somebody who does hm?
So, okay, selling service to use
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car dealer, car dealerships, and
you know that's a very there's some big
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players in that industry. So if
we have a relationship with auto nation or
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Carmax and there's a location in your
territory, who who serves that? Yeah,
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and what are you under limitations?
Is a franchise in terms of price?
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What if the franchise or an happy
with how you're doing it or you've
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just started? Maybe there, maybe
there are several locations in the franchise or
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once to sort of ease you into
that. So all those are things from
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the franchise or standpoint that, if
it's applicable, you really have to think
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through those things. That makes perfect
sense to me. And do you find
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that, like you said, if
it's sort of an emerging brand and that
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new pioneer franchise, he has that
exclusive territory but the neighboring territory doesn't currently
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have a franchise Z is it common
for the franchise or to say yes,
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you can service that neighboring territory but
when we get the new franchise taking over
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that territory, you're going to have
to give up those customers, right,
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and you see that. I've got
to see that in a home cleaning business.
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You got regular customers. That's a
perfect example. And yes, you
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can service, but if we sell
that territory, you got to give those
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up. That makes sense. Another
for anyone that's considering a franchise, they
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should be thinking the end in mind, right, we hear that a lot.
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Or what's going to be your exit
strategy? And when I think about
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that I do think of the item
seventeen, because that is providing you with
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the terms, the term of the
franchise, Griment of Frand to the groom
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and has a term five, ten, fifteen years, not months. That
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would be a bad deal. Yeah, that we're exactly yeah, good luck.
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Good luck with that. And also, you know, item seventeen also
255
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gets into the ability to renew that
term or possibly sell transfer that agreement.
256
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Talk. Talk to us a little
bit about what you see is common exit
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strategies or you know what makes for
appealing or not an appealing item seventeen.
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Well, pretty much every franchise agreeing
that's going to provide that. If you
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want to sell you the franchise,
you've got to get approval of the franchise
260
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or and because they don't want to
come to work on Monday and find out
261
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that the franchise he is me,
somebody's been operating the business for all those
262
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years, and that's and that's reasonable
franchise oors, although franchise ors can be
263
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sort of hard nosed sometime, most
that I deal with or risk averse.
264
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They don't want to get in a
litigation over things that they really don't need
265
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to shore. So if it's a
reasonable request, they don't have any bad
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experience with the prospect, you know
he's not a competitor, that kind of
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thing, then generally they're going to
go along with it. A lot of
268
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times they want to know or you
are you burdening the buyer with so much
269
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debt that you know there's a chance, likelihood, he may not be successful?
270
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Thing they might want to look at. But and then they'll be a
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transfer fee, and those very so. I mean what I've seen most typically
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is it's a five thousand dollar something
like that. Arms a flat fee.
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Yeah, off in a flat fee
or a percentage, like a fifth of
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the initial fee. But you know, you know what the initial fee is,
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so you can, if you can
do the math, come up with
276
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that. But occasionally it's it's much
more than that. MMM. You know,
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it like another a whole new franchise
fee on transfer or renewal, and
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that's unusual and you know that's kind
of thank you. Want to push back
279
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on that? Makes Sense. I'm
sorry. Yeah, and generally they buyer
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will have to sign a new franchise
agreement. Wouldn't be a new fee because
281
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he's paying the transfer fee, but
the franchise or usually wants a new agreement
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on their new current format. I
was just going to ask that. Yeah,
283
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so if I yeah, so I
find the franchise the and you know
284
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I've know, I signed tenure term
franchise agreement and all of a sudden,
285
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seven years into my ten years or
so, I go hey, I want
286
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to sell this. I've built it
the whole by build cell model, find
287
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a buyer for my franchise territory.
That new buyer usually obviously has to be
288
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approved by the franchise or and that
new buyer, franchise Z typically will get
289
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a brand new franchise agreement in term
and new term. Yep, that's usually
290
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right. That makes perfect sense.
Another, I mean key item that we've
291
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already been talking about is this financial
performance representation, the item nineteen. We
292
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are starting to see more and more
franchise ors provide data here and I would
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like to say we welcome that data
add like. How do you commonly see
294
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those written? What do those what
does that data look like? How's it
295
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laid out? Sometimes it's simply gross
sales. HMM. You know, this
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is usually you would look at franchise, Franchise's that were open at least the
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entire prior year. HMM. So
you're not showing information on people that opened
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00:25:00.200 --> 00:25:03.759
up in December, that kind of
thing. And what what were their gross
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sales? Average gross sales across the
board. And one thing that they states
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have acquired in the in the FTC
has gone along with this. Anytime you
301
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talk about averages, you have to
show median numbers. So, which is
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important because I've got some. I
represent people who have franchise he's that may
303
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have huge territories and they have some
that are doing, you know, two
304
00:25:30.240 --> 00:25:34.799
million and gross sales, but they
have others that are not doing much at
305
00:25:34.839 --> 00:25:38.920
all or small their territories. And
you know, what's the guy in the
306
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middle? What does that look like? Sure and, as I mentioned earlier.
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Sometime the item nineteen information doesn't look
that good and I always sort of
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look at that guy person in the
middle and talk my my client. You
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know, how would you like to
be that? Is that what you you
310
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want to spend this money to be
grossing Seventy Five Tho dollars a year?
311
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You know that's not what most people
are in it. For sure. Absolutely,
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and there's a I think it's important
point to make that there's always a
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performance gap in a franchise system and
any business. Who got your high performers,
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your middle performers, low performers?
And another thing you have to do.
315
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If you give the information on your
top third, you have to give
316
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the information in the same format on
your bottom third. Okay, can't.
317
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You can't cherry pick like that.
Yep, yeah, it's pretty helpful from
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that standpoint. Yeah, it's always
welcome data. Now, sometimes franchise stores
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don't provide data. So what advice
do you give to someone when there is
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no data in the height of nineteen? How does someone get to build in
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that performer? Well, they'll need
to within that brand. They'll need to
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call some franchise he's, which they
ought to do anyway. Absolutely, one
323
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of the exhibits we talked about is
a list of the franchise. So if
324
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if I'm buying a franchise for Asheville, North Carolina, and there are a
325
00:27:06.920 --> 00:27:11.759
couple of other franchise's, you know, and in North Carolina or even maybe
326
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in Ashville, those would be people
I might call, and not just to
327
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ask about numbers, but what's your
experience being? How is the training?
328
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Yes, how is the software?
The point of sale system? Is At
329
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a good system? You know,
those kind of questions absolutely. But yes,
330
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if you don't mind my asking,
what kind of gross sales are you
331
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reaching? And you know where were
you maybe after year one? What how
332
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does what's the ramp up period?
That kind of thing extend, and sometimes
333
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people will have that kind of information
and sometime not. What's interesting to me
334
00:27:47.440 --> 00:27:52.680
as is when we have a ground
level franchise, or I mean you got
335
00:27:52.680 --> 00:27:56.039
to start somewhere, right, there's
an evolution to a system took out of
336
00:27:56.039 --> 00:28:02.119
a system. So and let's say
that ground level, you know you've got
337
00:28:02.160 --> 00:28:04.039
the founder of the of the business
model, the concept. Now they're ready
338
00:28:04.039 --> 00:28:07.440
to take that concept, package it, franchise it and start growing as a
339
00:28:07.480 --> 00:28:11.640
franchise system. And people want to
have data in the eye of nineteen,
340
00:28:11.680 --> 00:28:17.759
but their ground level, they don't
have franchise's with that to offer that data.
341
00:28:17.880 --> 00:28:21.680
But I'm starting to see some of
these ground level franchise ors provide data
342
00:28:21.720 --> 00:28:26.359
around their corporate locations. Right,
I see that. Are you seeing that?
343
00:28:26.720 --> 00:28:30.440
Yeah, and you can do that. The trick is once you start,
344
00:28:30.480 --> 00:28:33.880
once you have franchise he's, it
needs to be there their data.
345
00:28:33.920 --> 00:28:37.839
Okay, that makes sense to me. I had somebody who he did his
346
00:28:37.960 --> 00:28:44.200
data and I realize he was.
We were updating, we're newing for the
347
00:28:44.240 --> 00:28:48.200
year. And said, well,
we can't use that anymore because you've got
348
00:28:48.200 --> 00:28:52.200
five franchise he's. You need to
use their numbers. An he said their
349
00:28:52.240 --> 00:28:56.359
numbers aren't good because they don't follow
my system. So well, we got
350
00:28:56.359 --> 00:29:00.680
to stop. We can't either use
them or we are. You need to
351
00:29:00.759 --> 00:29:03.920
not do an item nineteen, no
date, no date, and I'd get
352
00:29:03.240 --> 00:29:11.279
that. Yeah, it's good to
know nothing another another important provision or item
353
00:29:11.279 --> 00:29:15.119
in the French hase disclosure document that
you touch upon is the item twenty.
354
00:29:15.160 --> 00:29:19.640
That really is that table of growth
and attrition. What time frame is that
355
00:29:19.720 --> 00:29:25.920
item twenty representing? It goes back
three years, the three year window.
356
00:29:26.119 --> 00:29:29.680
Yeah, yeah, so you see
at the beginning of each year and the
357
00:29:29.799 --> 00:29:32.920
end of the year, and then
one one of the tables, their five
358
00:29:32.960 --> 00:29:37.759
tables, one of them breaks it
down by state so you can see if
359
00:29:37.839 --> 00:29:42.160
it's you know, where the stores
are. HMM. And then there is
360
00:29:42.160 --> 00:29:48.559
an exhibit which there not only list
the franchise's who are in the system,
361
00:29:48.599 --> 00:29:52.119
also list those who left the system. MMM, which can be by transfer,
362
00:29:52.720 --> 00:29:56.839
you know, the agreement might have
expired or whatever. But if their
363
00:29:57.000 --> 00:30:03.359
terminations or the one call in this
left the system other which to me usually
364
00:30:03.359 --> 00:30:08.400
means they just went out of business
and closed. There their name and contact
365
00:30:08.440 --> 00:30:12.440
information should be in that exhibit.
If they left in the last year,
366
00:30:12.519 --> 00:30:17.400
okay, that makes perfect sense.
And you know what, I've had people
367
00:30:17.480 --> 00:30:22.160
that are looking to buy a franchise
say here in Atlanta and one of those
368
00:30:22.200 --> 00:30:26.920
people that left is in Atlanta.
HMM, and we'll call him. Yeah,
369
00:30:26.000 --> 00:30:30.359
and a lot of times there's an
extra perfectly good explanation. My wife
370
00:30:30.359 --> 00:30:34.400
get sick or we got transferred or
something like that. Life comes at you
371
00:30:34.559 --> 00:30:38.440
right, but it didn't always that
way. And staying you realize in talking
372
00:30:38.519 --> 00:30:44.839
to somebody that's complaining and negative and
angry that. Well, maybe the problem
373
00:30:44.880 --> 00:30:49.279
is in the look in the mirror. Right exactly the problem might be right,
374
00:30:49.319 --> 00:30:55.079
who's the common denominator? They're right. Maybe it's the operator. Yeah,
375
00:30:55.119 --> 00:31:00.200
of Frenchies. He okay. So
here is the the million dollar question
376
00:31:00.440 --> 00:31:08.759
that people frequently ask. What is
negotiable in the franchise agreement? Well,
377
00:31:08.799 --> 00:31:14.039
it hate to say it depends.
It does to bad lawyer answer, but
378
00:31:14.079 --> 00:31:19.799
it doesn't. If it's a fairly
new brand they're likely to be more negotiable.
379
00:31:21.039 --> 00:31:25.000
A lock times by the time the
person is come to me the franchise
380
00:31:25.799 --> 00:31:30.039
they've already been discussions. MMM,
you know. So the franchise or a
381
00:31:30.039 --> 00:31:33.039
read that I wouldn't pay royalties for
the first six months great or I would
382
00:31:33.039 --> 00:31:37.359
pay a lower amount for the first
year, something like that. Or there
383
00:31:37.440 --> 00:31:41.799
might be as sort of alluded to
early, there might be something that's not
384
00:31:42.319 --> 00:31:48.359
actually in the franchise agreement but has
maybe been discussed. So maybe a writer
385
00:31:48.519 --> 00:31:52.319
first refusal or an option on some
additional territory. You know that kind of
386
00:31:52.319 --> 00:31:59.079
thing. Sure, yeah, that
makes sense, but otherwise you know the
387
00:31:59.160 --> 00:32:01.359
royalty franchise ors, as you said, that's sort of where they make their
388
00:32:01.359 --> 00:32:08.720
money. They generally are not negotiating
that. Sometime there can be special circumstance.
389
00:32:08.839 --> 00:32:13.559
One thing we haven't talked about is
all franchise agreements are going to have
390
00:32:13.599 --> 00:32:19.000
a noncompete provision. I am so
glad you brought that up and people are
391
00:32:19.079 --> 00:32:22.119
sort of used to that. That
doesn't seem to surprise people. But sometimes
392
00:32:22.640 --> 00:32:30.960
the candidate or his spouse or partner, business partner, might be somebody that's
393
00:32:30.000 --> 00:32:35.680
already been in the business in some
way and we might need to carve out
394
00:32:35.880 --> 00:32:43.160
something that. You know, joe
as is already a representative of such and
395
00:32:43.240 --> 00:32:49.640
such tires, tire brand. Okay, will be allowed to continue that business
396
00:32:49.680 --> 00:32:52.839
and usually in that case the franchise
or is aware of that and that goes
397
00:32:52.960 --> 00:33:00.519
fine. But renegotiating the fundamental terms
of the agreement that the way, didn't
398
00:33:00.559 --> 00:33:05.039
go very far. That makes sense. One thing you you have we mentioned,
399
00:33:05.079 --> 00:33:10.480
but usually there's a personal guarantee and
a lot of times the franchise or
400
00:33:10.640 --> 00:33:15.839
once us, the spouse of the
person to sign a guarantee, and I
401
00:33:15.920 --> 00:33:20.240
encourage people just to fight back on
that and say no, this is my
402
00:33:20.319 --> 00:33:25.359
business, my spouse. It involved
spouses money is not involved, or she's
403
00:33:25.519 --> 00:33:29.720
and we're not going to do that. Okay. And so that is an
404
00:33:29.759 --> 00:33:32.759
area that is commonly pushed back on. Is that personal guarantee? Well,
405
00:33:32.920 --> 00:33:37.200
it's push back on in terms of
the spouse. Okay. Having every case
406
00:33:37.359 --> 00:33:42.160
the franchise, he's going to be
expected to sign a personal guarantee. Okay.
407
00:33:42.240 --> 00:33:47.519
Now, with any guarantee you can
try to negotiate limitations like a dollar
408
00:33:47.640 --> 00:33:52.319
limit, MMM, or a time
limit that if they're if we're not in
409
00:33:52.359 --> 00:33:54.319
default in the first three years,
then it drops off. Okay, that
410
00:33:54.440 --> 00:34:00.759
kind of thing. That makes sense. Yeah, the franchise agreement. If
411
00:34:00.759 --> 00:34:05.319
you're if you're doing a brick and
more, you're going to do a restaurant.
412
00:34:05.640 --> 00:34:08.960
So you you sign a franchise agreement, you have a royalty obligation,
413
00:34:09.000 --> 00:34:14.239
but you have a lease and you
have a loan. And if you decide
414
00:34:14.280 --> 00:34:17.280
it's not going well and you want
to close and you're fairly current, your
415
00:34:17.320 --> 00:34:22.079
current with your franchise or in most
cases, that's going to be the end
416
00:34:22.119 --> 00:34:23.760
of it. They know you haven't
done well. Right, but that isn't
417
00:34:23.800 --> 00:34:28.559
true with your landlord and it's not
true with your bank. So and you're
418
00:34:28.599 --> 00:34:31.119
going to be signing personal guarantee.
He's there. Okay, that makes sense.
419
00:34:31.320 --> 00:34:36.519
Those really are the bigger issue than
worrying about the guarantee on the franchise
420
00:34:36.559 --> 00:34:38.440
it right. Okay, Yep,
that makes perfect sense to me. Thank
421
00:34:38.480 --> 00:34:44.360
you for clarifying that very important well, that's kind of talk about. We
422
00:34:44.480 --> 00:34:49.559
kind of been talking about litigation lightly. You know, you know what's common
423
00:34:49.639 --> 00:34:54.199
what's not common litigation the franchise area. What are types of claims that are
424
00:34:54.280 --> 00:35:00.159
out there that we should be aware
of? Well, franchise ors initiate it
425
00:35:00.239 --> 00:35:07.360
when, usually when the franchise he
is been a bad a bad boy,
426
00:35:06.960 --> 00:35:13.639
they are under paying, maybe they
closed and owe a lot of money.
427
00:35:13.719 --> 00:35:15.960
It's amazing to me I get calls
a well, we have this franchise and
428
00:35:15.960 --> 00:35:21.480
he hadn't paid royalties in six months
and he goes wow, wow, that's
429
00:35:21.519 --> 00:35:27.280
a lot. Yeah, a lot
of money, but that or he's closed
430
00:35:27.679 --> 00:35:30.719
and we found out that he's continuing
in the business. Mylation of that non
431
00:35:30.800 --> 00:35:37.599
compete. So often times, from
the franchise or standpoint, it's those kind
432
00:35:37.639 --> 00:35:43.760
of situations and that's all sort of
based on the contract. From the franchise
433
00:35:43.880 --> 00:35:49.119
e standpoint, it's a little more
complicated. So it's usually a situation where
434
00:35:49.119 --> 00:35:55.840
I bought this franchise Rhoda check for
Fiftyzero. I bought all this inventory and
435
00:35:57.639 --> 00:36:02.079
it's been a disaster. I feel
like that lied to me and you know
436
00:36:02.119 --> 00:36:07.840
I want all my money bank.
Well, that's in there. Various ways
437
00:36:07.880 --> 00:36:09.800
to dress that up, but that's
that's a hard case. Yes, I
438
00:36:09.800 --> 00:36:14.880
would think. So you really have
to find some bad conduct on the part
439
00:36:14.920 --> 00:36:19.119
of the franchise or to sure to
make that go. The other area that
440
00:36:19.320 --> 00:36:24.119
is gotten more attention in recent years
is claims by third parties. Well,
441
00:36:24.159 --> 00:36:30.960
they're two different claims. These are
sort of statutory claim sometime there have been
442
00:36:30.960 --> 00:36:37.519
franchise's who have claimed that really,
the agreement says I'm an independent contractor,
443
00:36:37.559 --> 00:36:42.360
but really I'm just an employee of
yours. I mean you, you got
444
00:36:42.400 --> 00:36:45.400
the accounts for me. It came
out of the janitorial business. I was
445
00:36:45.440 --> 00:36:47.400
just going to say that sounds Jims
Harrelson. Yeah, you. So I'm
446
00:36:47.400 --> 00:36:52.679
going to say you, Yeahs,
and I'm giving you fiftyzero worth of accounts,
447
00:36:52.760 --> 00:36:53.920
right, and you're going to service
some. I'm going to tell you
448
00:36:53.920 --> 00:36:58.840
when and you know where and all
that. Well, that's sounds more like
449
00:36:58.920 --> 00:37:07.639
an employment or so there's that.
And then another area is an employee of
450
00:37:07.639 --> 00:37:15.480
a franchise Z that claims that they
didn't get were paid properly waging hour type
451
00:37:15.480 --> 00:37:19.880
claim, overtime claim, and claim
that the franchise or actually is what they
452
00:37:19.880 --> 00:37:24.199
call a joint employer. Yes,
and McDonald's got into some litigation on this,
453
00:37:24.239 --> 00:37:31.000
and you know that McDonald's directs everything
about ours and you know who works
454
00:37:31.000 --> 00:37:35.719
and different shifts and all that kind
of thing. Okay, and there's been
455
00:37:35.719 --> 00:37:38.599
some statutory activity in California a lot
of times, leads the way on these
456
00:37:38.599 --> 00:37:44.239
things and change the law a little
bit on that, making those claims a
457
00:37:44.280 --> 00:37:50.400
little more viable. MMM, and
it's changed a little bit with administrations in
458
00:37:50.440 --> 00:37:55.519
Washington. Yeah, back back and
forth now that we've gone back and forth
459
00:37:55.559 --> 00:38:01.800
a little bit in recent elections.
So those, those have come up,
460
00:38:01.960 --> 00:38:07.440
but again, those are not really
central to the underlying relationship between franchise or
461
00:38:07.480 --> 00:38:12.320
in franchise right. And and the
push back around the joint employer it is
462
00:38:12.360 --> 00:38:17.719
really seems like it's now been favored
as they recognize that it's not a joint
463
00:38:17.760 --> 00:38:25.079
employment on a franchise Z level.
It's their employees and the franchise or is
464
00:38:25.119 --> 00:38:30.079
not a joint employer with the franchise
Z. I know that's been an ongoing
465
00:38:30.119 --> 00:38:32.039
battle, but are we? Are
we finding it that it's really lean more
466
00:38:32.159 --> 00:38:39.760
towards that nonjoint I think so.
And what what had come up and at
467
00:38:39.800 --> 00:38:45.519
one point was they would look at
the court would look at the count provisions
468
00:38:45.519 --> 00:38:52.519
of the contrary, and does the
franchise or have the right to exercise certain
469
00:38:52.599 --> 00:38:58.360
kinds of control? Okay, not. What had been looked at before is
470
00:38:58.360 --> 00:39:01.800
is the franchise or actually doing that? Is that the nature of the relationship?
471
00:39:01.840 --> 00:39:06.280
And I think more and more we're
getting back to back to that.
472
00:39:06.599 --> 00:39:12.320
Okay, is the franchise or in
anytime there's a new theory or there's some
473
00:39:13.000 --> 00:39:16.800
case out somewhere where the franchise or
gets pot you addling, you find new
474
00:39:16.840 --> 00:39:22.440
paragraphs in the franchise. So every
one of them now says, Mr Franchise,
475
00:39:22.639 --> 00:39:27.559
you are you acknowledge you are solely
responsible for all your employment mattered hiring,
476
00:39:27.679 --> 00:39:32.400
firing, terms of employment, etc. Etc. which kind of explains
477
00:39:32.400 --> 00:39:38.280
why when someone reads that Franchise Agreement
or franchise disclosed for docuns on this seems
478
00:39:38.320 --> 00:39:44.639
to lean so much towards the franchise
or versus the franchise, and to me
479
00:39:44.840 --> 00:39:49.719
that's a perfect example of why they
have to put those clauses and provisions in
480
00:39:49.760 --> 00:39:53.159
place, because they're really trying to
think about all the what if scenarios.
481
00:39:54.480 --> 00:39:59.639
And as lengthen, Gosh, I
get these. You've seen him, I'm
482
00:39:59.679 --> 00:40:02.760
sure. They just get longer and
longer and I get something almost three hundred
483
00:40:02.760 --> 00:40:07.239
pages and you know you're reading and
you're reading and you think, I think
484
00:40:07.280 --> 00:40:12.239
I've read this before. You'll comply
with our standard. Yeah, I guess
485
00:40:12.239 --> 00:40:15.440
I get that. We got them
message as I figured that repeated the message
486
00:40:15.440 --> 00:40:21.079
will really come through right. Years
Ago I was at it was southeast Franchise
487
00:40:21.079 --> 00:40:25.079
Form Program in the holiday in at
a speaker and they had gone through a
488
00:40:25.119 --> 00:40:31.800
complete rebranding and all their franchise he's
had spent a ton of money on their
489
00:40:32.079 --> 00:40:37.280
hotels and had it had been productive? Apparently the revenues went up. Yeah,
490
00:40:37.320 --> 00:40:39.840
and I asked question, what was
your franchise? And you know,
491
00:40:40.440 --> 00:40:46.000
two thirty four million dollars at all
lay in motel spent on renovation and I
492
00:40:46.039 --> 00:40:50.440
asked the question. Was it your
franchise agreement gives you the right to mandate
493
00:40:50.519 --> 00:40:55.679
that. Yes, and sometime later
I saw their agreement and contrast of these
494
00:40:55.719 --> 00:40:59.840
others that are so long, it
couldn't have been more than about ten pages
495
00:40:59.920 --> 00:41:04.159
long, and on every page and
in every paragraph it basically said you will
496
00:41:04.199 --> 00:41:07.920
do exactly what we read. Yeah, right, yeah, yeah, that's
497
00:41:08.159 --> 00:41:13.400
we are going to protect this brand. And they done and they have some
498
00:41:14.039 --> 00:41:17.079
more power to write and and it's
paid off well for the franchise's. So
499
00:41:17.199 --> 00:41:22.440
there's how you there too. Yeah, and franchise he's as a group.
500
00:41:22.800 --> 00:41:28.320
That's an extreme example the shark and
to not want to spend money, you
501
00:41:28.320 --> 00:41:32.760
know. And so if there's a
local advertising requirement, just you think that's
502
00:41:32.840 --> 00:41:37.239
something that people would realize they need
to a net to, but a lot
503
00:41:37.239 --> 00:41:44.599
of times not. Yes, so
I've even had franchise ors change the agreements
504
00:41:44.639 --> 00:41:49.000
for New People so that that money
is actually paid to the franchise or that
505
00:41:49.119 --> 00:41:52.119
administers it. So yes, we
need to get it and then we know
506
00:41:52.199 --> 00:41:57.159
that it's come in and we're going
to oversee the spending of that money.
507
00:41:57.599 --> 00:42:00.599
I ment asts earlier. So I'm
going to circle back around to this question.
508
00:42:00.679 --> 00:42:07.519
That's in my mind and it's around
the noncompete and obviously common practice to
509
00:42:07.519 --> 00:42:13.800
have a noncompete. Is there a
term? So let's say I have a
510
00:42:13.840 --> 00:42:17.239
residential cleaning franchise business. It's a
ten year term. That ten year term
511
00:42:17.239 --> 00:42:23.559
comes to an end, I decide
not to renew my franchise agreement. How
512
00:42:23.599 --> 00:42:29.400
long I mean I by not allowed
to then go out and start Hamela curry's
513
00:42:29.480 --> 00:42:34.360
residential cleaning business? Like, how
long do I have to wait due to
514
00:42:34.400 --> 00:42:37.559
that noncompete? Well, it'll be
spelled out in the in the agreement.
515
00:42:37.639 --> 00:42:43.039
Shore. I mean typically it's first
of allus during the term. Okay,
516
00:42:43.159 --> 00:42:45.440
I don't want you, they don't
want to her in you and then find
517
00:42:45.440 --> 00:42:47.519
out right your operating. Thank you
for teaching me how to do this right.
518
00:42:47.719 --> 00:42:52.400
Exactly, stealing my business. Recipe
block there. Yes, in the
519
00:42:52.400 --> 00:42:57.159
next county. And then, I'd
say typically, maybe two years. Okay,
520
00:42:57.320 --> 00:43:01.639
I thought that was and then very
important. What is the territorial limitation?
521
00:43:01.840 --> 00:43:07.239
MMM, and that's been an interesting
area. You know, in Georgia
522
00:43:07.320 --> 00:43:14.639
historically it's very difficult to enforce these
things. They were all kind of traps
523
00:43:14.679 --> 00:43:20.960
that and the rule was that if
any part of it was invalid. Then
524
00:43:21.000 --> 00:43:24.559
the whole thing collapsed and so you
have franchise agreement's growing up in another state.
525
00:43:25.239 --> 00:43:30.480
That would say, for instance,
that you can't compete two years within
526
00:43:30.800 --> 00:43:36.119
fifty miles of anywhere where we have
a location. Let's see, that doesn't
527
00:43:36.119 --> 00:43:42.480
seem unreasonable. But under the old
on Georgia that was invalid because when you
528
00:43:43.280 --> 00:43:45.159
rule was when you sign the agreement. You need to be able to look
529
00:43:45.199 --> 00:43:50.599
at a map right then and tell
where you can go and not go in
530
00:43:50.639 --> 00:43:54.199
that. You can't do that if
it's based on where stores open up later.
531
00:43:54.480 --> 00:44:00.159
Gotcha, but the Georgia law changed
about ten years ago and you know,
532
00:44:00.199 --> 00:44:07.039
something like that probably works now.
Okay, what trends? You know
533
00:44:07.159 --> 00:44:14.400
trends and businesses being franchise, you
know it. We all think of food
534
00:44:14.599 --> 00:44:17.880
or food related conceps. We all
think of retail, bricks and mortar,
535
00:44:17.880 --> 00:44:22.119
because that's what we know as a
consumer, what we drive by every day.
536
00:44:22.679 --> 00:44:27.039
And, as you and I know, there are thousands of franchises out
537
00:44:27.079 --> 00:44:30.960
there that cross over many different industry
categories, which we've been mentioning. Janitorial
538
00:44:31.000 --> 00:44:36.920
cleaning, residential cleaning, senior care. But what do you start in?
539
00:44:36.960 --> 00:44:40.079
Those are non brick and mortar,
let's say. Right now. What are
540
00:44:40.119 --> 00:44:45.199
you seeing as far as trends that
are happening? Well, I'm seeing less
541
00:44:45.199 --> 00:44:52.039
and less brick and mortar. And
we talked before we started today about a
542
00:44:52.039 --> 00:45:00.440
brand that it looked pretty interesting.
Game Show, the game gaming were Randy,
543
00:45:00.679 --> 00:45:04.480
which which in the whole appeal was
it? It brought people in rather
544
00:45:04.559 --> 00:45:07.320
than being in their basements, you
know, gaming with people, that that's
545
00:45:07.480 --> 00:45:10.480
what they're all there together. Well, in the last two years that's not
546
00:45:10.519 --> 00:45:15.000
been a good, good model,
sure, and so I don't really see
547
00:45:15.000 --> 00:45:21.280
a whole lot of brick and mortar
so much anymore and if so, it's
548
00:45:21.320 --> 00:45:28.119
limited, you know, but more
and more where you might have an office,
549
00:45:28.199 --> 00:45:31.079
like a home cleaning business, typically
you'd had an office, right,
550
00:45:31.119 --> 00:45:37.079
but you know, that kind of
thing, and that appeals to me because
551
00:45:37.400 --> 00:45:45.199
with what I do I get people
who are in some awful situation and you
552
00:45:45.199 --> 00:45:47.599
know, they're on a lease and
it's six thousand a month and they have
553
00:45:47.639 --> 00:45:52.119
an SBA loan in their house,
has pledge. It's just tragic. Hmmm,
554
00:45:53.039 --> 00:45:59.079
whereas if you if your home cleaning
franchise, yes, you write that
555
00:45:59.199 --> 00:46:01.840
check and you buy some supplies and
you know in six months later, if
556
00:46:01.840 --> 00:46:05.960
it's not working, you know,
you may lose that money, but that
557
00:46:06.079 --> 00:46:09.760
might be it. Right. I
found that to be pretty appealing. Yeah,
558
00:46:10.000 --> 00:46:14.719
so a lot more trending, a
lot more service space to businesses coming
559
00:46:14.719 --> 00:46:16.599
out of the woodwork, all the
way from like, you know, cleaning
560
00:46:16.719 --> 00:46:23.239
service, as home improvement, less
pet services, senior care. Yeah,
561
00:46:23.559 --> 00:46:29.960
yeah, yeah, we're really seen
a lot of growth in those categories.
562
00:46:30.159 --> 00:46:35.360
I guess still seeing brickmore. I
see brick and mortar a lot when,
563
00:46:36.280 --> 00:46:40.320
well, one, when you have
the financial latitude to do that and secondly,
564
00:46:40.400 --> 00:46:45.119
if you're looking for something that might
permit more of a semi APPs and
565
00:46:45.239 --> 00:46:52.599
tea operator model. It seems like
those work really nicely for semi absentee operators.
566
00:46:52.639 --> 00:46:54.599
Do you see that? Yes,
and that makes sense. And yes,
567
00:46:54.719 --> 00:47:00.079
our good manager who's there, because
increasingly I when I meet with people
568
00:47:00.079 --> 00:47:02.960
and they're looking to buy franchise,
if I ask, are you going to
569
00:47:04.039 --> 00:47:07.039
quit your job, and Oh no, no, not planning on doing that,
570
00:47:07.079 --> 00:47:12.519
and the franchise or knows that.
So yeah, any business that wins
571
00:47:12.559 --> 00:47:16.280
itself to that is going to appeal
to a lot of people. Yep,
572
00:47:16.360 --> 00:47:20.679
yeah, and with a lot of
those. There's more upside, right.
573
00:47:20.800 --> 00:47:23.320
I mean, if you're running a
subway, you're going to get a certain
574
00:47:23.320 --> 00:47:27.760
amount of business just because that names
up there. It was sure right,
575
00:47:27.800 --> 00:47:32.679
but but there's a there's a limited
upside with a business like that, whereas
576
00:47:32.719 --> 00:47:37.559
if you've got a senior care business
and you're really good at selling it,
577
00:47:38.159 --> 00:47:42.079
you know, taking care of customers, you can do very well. Yeah,
578
00:47:42.159 --> 00:47:45.800
let's lower up with lower overhead.
Yeah, well, with relatively low
579
00:47:45.840 --> 00:47:47.840
overhead, low fixed cost. Anyway. Yeah, okay, well said.
580
00:47:49.000 --> 00:47:52.239
I'm very well said. Yeah,
and I'm always amazed. I may have
581
00:47:52.280 --> 00:47:55.920
told the story last time, but
years ago, you know, people come
582
00:47:57.000 --> 00:48:00.519
in and sometimes the concept is kind
of like, you know, this is
583
00:48:00.559 --> 00:48:05.239
a business, this is a thing
and I've never heard of it. But
584
00:48:05.360 --> 00:48:09.239
she was looking to buy a new, brand new concept. Huh. It's
585
00:48:09.239 --> 00:48:14.920
called one eight hundred got junk and
now you see it everything everywhere this big
586
00:48:15.039 --> 00:48:17.559
territory in Atlanta. Paid a lot
of money and she was very nice and
587
00:48:17.639 --> 00:48:22.199
very smart. You know, I'm
kind of thinking it will. Why would
588
00:48:22.239 --> 00:48:29.440
people pay a lot of money to
have you come get their stuff? So
589
00:48:29.480 --> 00:48:32.800
she bought it and a few years
later she calls me who. This is
590
00:48:32.840 --> 00:48:37.440
Alice Johnson. Do you remember me? And usually those are not good calls.
591
00:48:37.800 --> 00:48:38.760
Right when I get that call and
I said, Oh, yeah,
592
00:48:38.800 --> 00:48:43.639
I remember you. How's it going? Yes, and she said great,
593
00:48:44.199 --> 00:48:46.920
this is a great business. In
matter of fact, I'm buying bigger territory.
594
00:48:47.119 --> 00:48:52.320
HMM. And she said that the
eight hundred number. That's where the
595
00:48:52.320 --> 00:48:55.320
business comes from. We're not answering
the phone. They people call the a
596
00:48:55.400 --> 00:49:00.719
hundred number, the franchise or directs
the appointment to us. Yeah, appointment
597
00:49:00.800 --> 00:49:05.000
is set, we just show up
and do the work. Absolutely, guys
598
00:49:05.039 --> 00:49:12.599
in some trucks. I've used that
service as a consumer. Absolutely. So,
599
00:49:12.679 --> 00:49:15.320
what are some of the challenges that
you see franchise ors and franchise he's
600
00:49:15.360 --> 00:49:21.679
facing? Well, with franchise ars, a lot of these are people,
601
00:49:21.840 --> 00:49:25.119
these are entrepreneurs and they have,
you know, their own store to and
602
00:49:25.159 --> 00:49:30.840
they have their idea how things ought
to be done and it's to let go
603
00:49:30.360 --> 00:49:36.960
and understand that that franchise is not
your employee and that, even if they're
604
00:49:37.039 --> 00:49:40.559
good, they're going to do some
things that are not in accordance with what
605
00:49:40.599 --> 00:49:45.960
you would like for him to sure. So that's hard for people. M
606
00:49:45.280 --> 00:49:49.679
and you get people that are just
very frustrated. I get have a couple
607
00:49:49.760 --> 00:49:54.079
there whenever they call there angry about
something. And and then from a franchise
608
00:49:54.239 --> 00:49:59.800
standpoint, you know that's it takes
a special kind of person to be a
609
00:49:59.840 --> 00:50:04.599
successful franchise. Sure, I probably
seen this, but you have to be
610
00:50:05.199 --> 00:50:07.360
something of a risk taker. Right, you're going to be putting a lot
611
00:50:07.400 --> 00:50:13.119
of money into this thing. sellent
like and you're hedging your risk a little
612
00:50:13.159 --> 00:50:16.199
bit buying a franchise. It's right, but you also have to understand that
613
00:50:16.280 --> 00:50:21.159
it's a brand that they own,
not you, and you've got to follow
614
00:50:21.280 --> 00:50:24.480
the all of the system guidelines.
That's right. I had somebody years ago,
615
00:50:24.519 --> 00:50:28.840
I don't remember what kind of business
was, and she was really at
616
00:50:28.880 --> 00:50:31.920
loggerheads with the franchise or and they
were fussing at or. She wasn't doing
617
00:50:32.000 --> 00:50:37.159
well. HMM. Her sales were
okay, but are profitability was poor.
618
00:50:37.440 --> 00:50:42.000
And she came in and she said
they told me that I was paying my
619
00:50:42.039 --> 00:50:45.920
employees too much, and so what, what business is it of theirs that
620
00:50:45.159 --> 00:50:49.400
what up employs? And I said, well, you know, this is
621
00:50:49.440 --> 00:50:52.960
my client as a well, you
know, that's that is their business to
622
00:50:52.159 --> 00:50:55.719
you want them to look at this
right help you so, and that's what
623
00:50:55.760 --> 00:51:00.280
they're trying to do. I don't
know what you're paying your employees and maybe
624
00:51:00.280 --> 00:51:05.920
you're not over pain, but some
people just don't play well with others,
625
00:51:05.920 --> 00:51:08.760
I guess. Yes, and yeah, it just not gonna kind of work
626
00:51:08.800 --> 00:51:15.079
well. One of the new guy
who's with fresh and Joe Burtney, said
627
00:51:15.079 --> 00:51:17.960
people are always saying that they know
somebody be a great franchise because he's a
628
00:51:19.000 --> 00:51:22.679
real entrepreneur. MMM, you know, I don't want to. I want
629
00:51:22.719 --> 00:51:27.400
somebody that's going to follow the system. All of the system. Complicated Business
630
00:51:27.400 --> 00:51:30.360
and we want people that will,
yeah, do what we tell them.
631
00:51:30.519 --> 00:51:35.400
You're not cooking hot dogs and,
you know, selling Burgers at the yogurt
632
00:51:35.480 --> 00:51:37.599
job, right exactly. I'd yet
that and that's why I was kind of
633
00:51:37.599 --> 00:51:40.400
Google. I say, you know
what, sure, there's always a performance
634
00:51:40.400 --> 00:51:45.159
gap within a franchise system. And
you know, if everyone's receiving the same
635
00:51:45.159 --> 00:51:50.039
training, the same support, same
brand names, same proven methods of operations,
636
00:51:50.079 --> 00:51:54.199
and let's say you have to franchise
sitting in equal market opportunities, ones
637
00:51:54.280 --> 00:51:59.079
blowing it up, the other ones
not doing all that great. Well,
638
00:51:59.119 --> 00:52:01.960
what's the common denominator. There's the
franchise, it's the operator. One of
639
00:52:02.000 --> 00:52:07.000
the operators maybe is choosing to follow
the system, or maybe they're stronger in
640
00:52:07.119 --> 00:52:10.679
sales or stronger and customer service,
or they don't have local Bob who wasn't
641
00:52:10.760 --> 00:52:14.800
very friendly work in the front desk. You know, you got. Those
642
00:52:14.800 --> 00:52:17.840
are the little things that can create
the performance gap and usually comes down to
643
00:52:17.880 --> 00:52:22.400
the operator. I actually had a
guest on the radio show. Gosh,
644
00:52:22.440 --> 00:52:25.920
I think it was last year.
He wrote the Book Wealthy Franchise Z and
645
00:52:27.480 --> 00:52:30.960
one of the topics we got on
was loca. San Obviously is important,
646
00:52:31.000 --> 00:52:36.400
but even and okay, location is
still good enough. And one of the
647
00:52:37.360 --> 00:52:40.840
I guess one of the real points
he was trying to make was what really
648
00:52:40.880 --> 00:52:49.760
can differentiate one franchise from another is
the human element and the mindset and,
649
00:52:50.559 --> 00:52:58.159
yeah, learning to play well together
right. And a lot of times somebody
650
00:52:58.199 --> 00:53:02.480
will open a franchise business and I'll
do well and then it starts to decline
651
00:53:04.000 --> 00:53:08.320
and sometime there's actually been a change
in management, maybe the owners or of
652
00:53:08.400 --> 00:53:14.880
aged and it brought their kids in. I have that come up recently and
653
00:53:15.079 --> 00:53:16.159
you know, all the kids an
hour on the kids. I said,
654
00:53:16.199 --> 00:53:20.760
you know, they're adults all,
they're all in the payroll. But you
655
00:53:20.800 --> 00:53:22.559
know, we don't need to be. This is a pie store. We
656
00:53:22.559 --> 00:53:30.079
don't need to be paying a CFO
eightyzero dollars right because she's married to correct
657
00:53:30.199 --> 00:53:34.119
son. That's not it's not going
to work. That's not the idea of
658
00:53:34.119 --> 00:53:39.559
business practice. Right, Tom you
are a wealth of knowledge and I really
659
00:53:39.599 --> 00:53:44.679
really appreciate everything you've shared about franchise
law. I hope our listeners really received
660
00:53:44.719 --> 00:53:47.559
a lot out of this and closing
it, anything else you can think of
661
00:53:47.559 --> 00:53:52.760
that you want to share with our
listeners? Well, I've enjoyed it as
662
00:53:52.800 --> 00:53:57.440
an area of practice. Just get
to see all the businesses out there.
663
00:53:57.519 --> 00:54:01.719
Yes, and I represented a lot
of franchise's who've done real well and very
664
00:54:01.800 --> 00:54:07.599
pleased with the business. Absolutely.
Yeah, there are failures and there's litigation,
665
00:54:07.840 --> 00:54:13.639
but a lot of times with my
franchise or clients I'll look through the
666
00:54:13.639 --> 00:54:16.039
list of their franchise he's and ever
allows. You know, eighty percent of
667
00:54:16.039 --> 00:54:21.199
these people I never have any contact
with because that's because they're doing just fine.
668
00:54:21.320 --> 00:54:23.880
That's right, that's right. So
it does give an opportunity and just
669
00:54:23.920 --> 00:54:30.039
need to be careful going in that
it is a business you want. It's
670
00:54:30.159 --> 00:54:35.199
kind of business you really want to
be in. Can you afford it?
671
00:54:35.320 --> 00:54:37.559
Yes, it makes sense for you, you know. Is it a business
672
00:54:37.639 --> 00:54:43.360
that should be around? No,
it's not something to do with pay phones
673
00:54:43.519 --> 00:54:51.000
or some technology to technology sensitive and
and there's some great opportunities. Out there.
674
00:54:51.039 --> 00:54:53.039
I agree to agree. Yeah,
a lot of a lot of wealth
675
00:54:53.119 --> 00:54:58.239
created underneath the franchise model and there
is a degree of rest but it's also
676
00:54:58.239 --> 00:55:02.800
a risk mitigation opportunity as well to
become a business owner, putch in a
677
00:55:02.840 --> 00:55:07.280
stronger position for success. And you
hit on something that I think it's really
678
00:55:07.280 --> 00:55:10.920
important that I frequently say. It
really is about alignment. You know.
679
00:55:10.960 --> 00:55:15.559
Are we aligning with you as an
operator? And we can operator, you
680
00:55:15.559 --> 00:55:19.119
can be. Are we aligning with
your investment range? What's going to make
681
00:55:19.159 --> 00:55:23.119
sense for you financially? Are we
aligning with the market opportunity for you?
682
00:55:23.400 --> 00:55:28.599
Are is aligning with your lifestyle and
your long term vision, short term goals,
683
00:55:28.639 --> 00:55:31.519
long term? So you know,
it's all about alignment and and that's
684
00:55:31.519 --> 00:55:36.599
why you work with people like me
and my business partners. Right ass are
685
00:55:36.599 --> 00:55:40.000
going to help, but help you
navigate those waters and find franchise that really
686
00:55:40.039 --> 00:55:45.000
does align for you. But again, Tom, thank you so much.
687
00:55:45.519 --> 00:55:51.400
I mean always enjoy our conversations.
You know. I just want to say
688
00:55:51.440 --> 00:55:55.079
you know, there's such significant value
of working with a franchise attorney. A
689
00:55:55.079 --> 00:56:00.960
franchise agreement is a legal contract that
you're entering into and franchise law again,
690
00:56:00.159 --> 00:56:07.239
is specialized, so really important be
wise as you are selecting your franchise attorney
691
00:56:07.280 --> 00:56:10.559
as such as Tom Branch. You
want to have someone who has deep experience,
692
00:56:12.000 --> 00:56:15.760
who's willing to get in there review
the agreement, explain the documents,
693
00:56:15.840 --> 00:56:20.199
the obligations is a franchise z and
to let you know if there are any
694
00:56:20.280 --> 00:56:23.800
concerns or clauses that need to be
balanced. Sometimes it's just balancing out those
695
00:56:23.840 --> 00:56:29.400
clauses. So again, thank you, Tom and I also want to go
696
00:56:29.440 --> 00:56:34.119
ahead and I want to be sure
to thank our listeners. Think thank you
697
00:56:34.159 --> 00:56:37.960
to our guests, our listeners and
our sponsors. This is Pamela Curry,
698
00:56:37.079 --> 00:56:43.800
the host of Franchise Business Radio and
certified franchise consultant. Please please remember that
699
00:56:43.840 --> 00:56:47.159
if you or someone you know is
considering franchise ownership, then don't feel like
700
00:56:47.159 --> 00:56:51.480
you have to navigate those waters all
by yourself. There is a lot to
701
00:56:51.559 --> 00:56:58.440
learn. Myself and business partners specialized
and helping individuals on selecting a franchise and
702
00:56:58.480 --> 00:57:04.079
being effective in doing their due diligence
to make sure you're making informed decision when
703
00:57:04.159 --> 00:57:08.599
selecting a franchise. So if franchise
ownership is something you would like to seriously
704
00:57:08.719 --> 00:57:15.000
pursue, then contact me for our
complementary franchise consultation. I would welcome be
705
00:57:15.039 --> 00:57:21.800
in a resource to you. Simply
email me at Pam at franchise intellect or
706
00:57:21.920 --> 00:57:27.400
call text eight for seven, nine
seven zero, eight seven six five.
707
00:57:27.400 --> 00:57:31.519
Again, that's eight four seven,
nine seven zero, eight seven six five.
708
00:57:32.239 --> 00:57:37.199
As a simple reminder, the franchise
business radio as a platform for bringing
709
00:57:37.480 --> 00:57:43.159
together business professionals to connect, educate
and collaborate to serve the franchise community and
710
00:57:43.199 --> 00:57:46.280
those considering franchise ownership. As always, thank you to our guests, our
711
00:57:46.320 --> 00:57:53.559
listeners and our sponsors, specifically franchise
intellect, insider knowledge for selecting a business
712
00:57:53.559 --> 00:57:59.679
and also made possible by franchise city
and France serve. Thanks for tuning in.
713
00:58:01.840 --> 00:58:05.840
Thank you again for joining Pamela Curry
in her guest for the Franchise Business
714
00:58:05.880 --> 00:58:10.360
Radio Show sponsored by franchise intellect.
Knowledge of the franchise community for franchise selection.
715
00:58:10.360 --> 00:58:15.440
More Info at franchise intellectcom, also
made possible in part by franchise dot
716
00:58:15.519 --> 00:58:20.119
city, a better way to buy
our franchise. More Info at franchise dot
717
00:58:20.119 --> 00:58:24.119
city and friends serve the world's largest
franchise consulting and expansion organization. More Info
718
00:58:24.199 --> 00:58:29.480
at Frand servecom. Use the social
media links here to share today's show and
719
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check out were episodes at Franchise Business
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