Episode #19 - Managing You Franchise Agreements with the End in Mind

My Podner on this episode is Tom Spadea. Tom and I will discuss the benefits of properly managing the FDD and the Franchise Agreement, from the beginning, making sure to keep the end in mind. The "end" he speaks of is a possible acquisition by an investment company. What will they expect to see when they look at your franchisees contracts in your files?

 

Time Stamp

Tom Spadea Intro                              00:00:40

Segment 1                                           00:03:22

Get to know Tom Spadea

Segment 2                                           00:24:40

Topic Segment – Managing Your Franchise Agreements with the End in Mind

Bonus Segment                                 00:57:15

Managing Franchisee Growth

Segment 3                                           01:02:50

Quickdraw Questions

 

Topics discussed in this episode:

Where do most franchisors get it wrong? Many franchisors and franchise attorneys focus mostly on the substantive issues of the and forget about procedural issues related to the process - managing latent defects

• Item 23 receipt page not being properly executed and filed
• Guarantees not properly executed
• Individual versus LLC signing FA/lease

You can have the best FDD and franchise agreement in the world, but if you don’t manage the process properly, it can cost you a lot of money in the short term with an unenforceable contract, and in the long run, upon exit.

It’s important to understand who the real audience of the Franchise Agreement is. It is the franchisee, but it is also a prospective private equity investment firm who may want to purchase your system in the future.

 

What is the process?

Step 1: Make sure that the franchise agreement is up-to-date

Step 2: Geographical Analysis - Ensure that the franchisor is registered in every registration state where the concept will be offered. That includes where the prospect is currently located as well as where they want to open a location. Both states must be registered if required by that state.  Deliver the correct FDD for the state.

Step 3: Ensure that 14 days pass between delivery and signing of the Franchise Agreement, not including delivery day and signing day

Step 4: Spend the time to ensure that names are all spelled correctly, along with middle intials. Check the address, LLC name etc

Step 5: Prepare a custom franchise agreement based on the specific agreements made between franchisor and franchisee – do not use the sample franchise agreement that is included in the FDD. Deliver the document to all required recipients and ensure proper signatures

Step 6: Ensure that the lease includes all of the required language as per the franchise agreement

 

There are many different software packages that can help you with each aspect of the transaction, but Spadea Law has the platform that hits every element. Compliance Map helps franchisors ensure that they are only offering the franchise in the proper states. The link to the Compliance Map software demonstration is below:

https://vimeo.com/260105446

If you haven’t managed the steps of the process well, then it is not too late. Review your documents and get the documents in line now, before you are approached by an investor.

 

Books:

Exponential Organizations

By by Salim Ismail and Michael S. Malone

 

Seven Habits of Highly Effective People

By Stephen Covey

 

The E-Myth

By Michael Gerber

 

Khan

Conn Iggulden

 

Podcasts:

Dan Carlin’s Hardcore History

 

Tom Spadea

Spadea Lignana

www.spadealaw.com

610-662-0192 (cell)

 

Kit Vinson

FranMan Inc.

www.franman.net 

214-257-7685 x1

 

Kit Vinson