I was sitting there at 4:30am drinking a large drip coffee and thinking about my life’s direction – that’s what coffee shop franchisees do, by the way. I started thinking to myself about how this Franchisor-Franchisee thing is way more like a marriage than any other kind of business relationship on the planet. I thought surely someone else has written an article with this analogy so I went to a search engine and found a real gem that I wanted to share by Marilyn Sinclair of BMO in her article entitled ‘A good business partnership resembles a good marriage’. Please take three minutes (that’s how long it took me) to read this article because it’s awesome in every way when considering any kind of business partnership. A three minutes of your time that will save you years of possible suffering is what we like to call a good investment.
What I will do here is take Marilyn’s points of the article, use them as a structure and then angle them specifically on the Franchisor-Franchisee ‘union’ as it is a unique relationship.
The Dangers of Passion
Almost every franchisee I have spoken to our in coffee shop franchise had the same story to report – they put all logic aside during the hopeful and exciting discussions with the franchisor about ‘how good things should go when you take over your store’. We signed franchise agreements that no sober person would ever sign because of the ‘surely-these-50-other-franchisees-can’t-possibly-be-wrong’ delusion. Now, we are all facing the fact that we may have rushed into a ‘bad marriage’. Make sure you have a balance of wisdom with your passion.
Pros of Taking on a Partner
1. Complimentary Skills
Do not assume that the franchisor has world class talent working at head office. Every organization will showcase their top talent but crucial areas such as marketing, accounting, vendor relations, etc, may be run by unqualified or even unethical people. Do your homework. Never assume just because there is a nice shiny logo on many stores than everything is kosher.
2. Sharing the Risk
It is true that the franchisor shares some risk. If the Franchisee goes bankrupt and locks and walks, they are liable to the landlord for the lease and trying to keep the store open to look good to the public. If the whole chain goes badly, I suppose they might suffer the risk of not being able to fund their head office operations, but that’s really about it. The rest of the risk is yours, newlywed. Suck it up, buttercup because you signed the marriage certificate and it’s highly weighted in favour of your new Mr. Wonderful. Hopefully he’ll be kind after the honeymoon.
3. Shared Responsibility
We’ve learned a lot about this one over the years. Most folks buy a franchise because they assume that their hefty royalty fee includes some kind of guarantee. Thanks to the recent Dunkin’ Donuts case in Quebec there may now actually be some hope of providing some kind of value to the franchisee for the hard-earned royalty fee they pay. However, at the end of the day, your franchisee agreement (the legal stuff) can probably be summed up as “We’ll give you a logo and tell you what to do, but if things don’t work out, don’t come crying to me because we didn’t promise you anything.” In this marriage most people are signing in hopes of benefiting without truly knowing with whom you will be united. Just understand that the Franchisor may not be taking much responsibility for the success of the relationship.
Cons of Taking on a Partner
Let’s keep this simple: When you enter into a Franchisor-Franchisee marriage, your spouse will be watching your every step. If you don’t like that, run the other way.
Do you even know the directors and the people with whom you’ll be dealing on a daily basis? Likely not and it’s admittedly hard to expect to wine and dine with your Franchisor before signing. However, you have a bunch of currently-marriage spouses (and divorced ones) all over the city. Find them, treat them well, get to know them and milk them for every detail they have. You will be very surprised what you will learn about your future spouse. You may postpone the vows.
3. Sharing the Wealth
It’s true that if you are becoming wealthy with as a franchisee so is your franchisor. What they don’t tell you in marriage counselling is that if you are losing money at your job every month your Franchisor will still be there asking for 10% of your line of credit to keep his car running. Will he give you a break next month because of your hard times? We haven’t seen it yet in Vancouver but we wouldn’t expect them to publish it if it has happened. What we have seen repeatedly, though, is the Franchisor roughly blaming/accusing the Franchisee for not working long enough hours or working hard enough or spending enough of their own money on local marketing initiatives – all the while not offering any of their own resources to help. This can create a rough marriage environment, by the way. You would also expect the Franchisor to share the wealth by means of marketing but we have also seen this offering to be quite lacking.
4. The right ‘fit’
I think we’ve beat this dead horse. Be careful who you marry.
Have the difficult conversations before you tie the knot
We concur. Open the franchisee agreement and take the notes and discuss them with Franchisor. If you need a good lawyer in Vancouver with expertise in Franchises, by all means let us know and we’ll send you some contacts.
Go Slow – Don’t Rush
I’m admittedly a little envious of you, reader. There was no VCSFA when I bought my coffee shop franchise. There was no one to turn to except the active franchisees, lawyers and a few franchise websites. I’m not blaming anyone and it has been a great learning experience and now you can benefit greatly. Don’t rush is right. Ask the right questions before you sign because once you are married, you don’t want to know how hard it is to get divorced. In some cases, stores that have been for sale for years are not selling or their buyers have not been approved. At least with a marriage you can move to another city and get another job while you await your divorce papers but with a coffee shop franchise, you better make sure that store stays open! Be wise. Seek wise counsel.
We are here to help and don’t hesitate to contact us.