Franchise Lawyer Blog

Even in an economic environment as troubling and uncertain as the current one, the only way for a business to survive is to grow. For many smaller businesses, asking how to grow inevitably leads to an inquiry into the possibility of franchising.

So, is your business right for franchising? The answer is not always apparent, in part because success as an individual business does not guaranty success as a franchise model. There are many reputable sources of useful information regarding the viability of franchising, such as the Web site of the International Franchise Association, a large membership organization consisting primarily of franchisors. You should also refer to the Web site for this law firm.

When asking whether your business can be franchised, important things to consider are the following:
• Is your brand known? Successful franchises are built upon unique and readily recognized brands. If your brand is not already well known, you will need to make it well known as soon as possible.
• Has your business concept been tested and proven? Many entrepreneurs come to us with a concept but no established business. It is very difficult to franchise a mere concept. It is essential that at least one version of your business model is up and running before your can meaningfully consider franchising.
• Do you have a system that is replicable and that can be taught? For your business to become a successful franchise system, you must be able to teach franchisees how to operate the business in a manner that will work in various environments.
• Do you have the people to help you get your franchise off the ground? You must remember that running a franchise system is different from running your business as just a business. You will need expertise in marketing, building brand awareness, and sales. Many aspiring franchisors do not realize that even after the franchise plan is in place, it still has to be sold to the public.

We will discuss the viability of franchising a business further in entries to follow, offering actual practical case studies of successful franchising ventures.

Posted by Terrence M. Dunn | Permalink | Email This Post

Posted In: Franchise Development

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We noted in our first blog that both the business and the law of franchising are rapidly developing. One of our aims in this blog is to assist interested parties in staying abreast of those developments, whether they be attorneys, franchisors, franchisees or others working with them.

Our August 12 blog discussed a significant case for franchisees. Franchisor rights have also been evolving. In a significant victory for franchisors, a federal appeals court has ruled that a franchisor may require the purchase and use of specific equipment by its franchisees. The United States Court of Appeals for the Eighth Circuit, in a case involving Domino’s Pizza (Bores v. Domino’s Pizza, LLC, 530 F.3d 671 [2008]), overruled the trial court and held that a provision in the Domino’s franchise agreement permitted the franchisor to require its franchisees to purchase and install custom-designed integrated computer systems created specially for Domino’s units. The lower court ruling had caused significant concern in the franchise industry, where many franchise agreements require the purchase of specific computer equipment for point-of-sale systems.

The reversal turned on interpretation of the words “any” and “specification.” The franchisee plaintiffs argued that the provision at issue—“We will provide you with specifications for… computer hardware and software…. You may purchase items meeting our specifications from any source.”—had meaning only if the equipment at issue were available for sale from more than one source. The court disagreed. The court held as well that in fact a franchisee could purchase the point-of-sale equipment mandated either new from Domino’s or used from another franchisee.

Franchise practioners continue to assemble these fresh readings of contract language and statutory references to make certain that their own documents present their clients with the most advantageous interpretation.

Posted by Michael Einbinder | Permalink | Email This Post

Posted In: Franchise Cases

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