- Don’t blindly follow the terms of your master franchisor’s current franchise contract used in a mature marketplace. Your legal team and executive staff need to review it from the legal and business contexts of your country as well as for terminology and culture nuances and then ask the master franchisor for permission to make the adaptations for your emerging or immature markets.
- At the time of the signing of the franchise contract, give the new franchisee a summary term sheet outlining the pertinent details of the agreement and have them sign it and place it in their franchise file.
- Have strict enforcement provisions and checklists for the processing of the initial due diligence of a franchise application, the supporting legal documentation and collection of the initial fees.
- Set up your internal accounting system and method to invoice and collect funds before you grant the first office.
- Delinquent franchisees will usually ask for fee reductions and more advertising or consulting support in the same breath. Anticipate this and be prepared with the answers.
- Always first seek to negotiate a financial repayment program with delinquent franchise fees before resorting to legal collections or litigation. Patience will be a virtue in the long run for good franchisees that have had a run of bad luck.
- Never let a franchisee dictate the terms of the contract.
- After all other efforts to resolve legal problems with your franchisee fail, never hesitate to enforce your franchise contract. Unfortunately it is sometimes necessary to terminate a major franchisee from your network as an example to the rest of the franchisees.
- Assign only one corporate executive who is responsible to physically inspect new offices prior to acceptance of the location and control the office layout and décor.
- Assign only one corporate executive to approve and sign off on all outdoor signage prior to ordering and installation at offices. Never hesitate to enforce removal of illegal signage.
- Prior to opening in your franchise region, conduct a legal review of the franchise laws and registrations of all domain names and other entities that might be trading under your brand name. Provide a list of all infringers to your master franchisor as soon as possible and preferably prior to signing your master franchise agreement.
- Don’t always assume that infringers are your enemy. Obviously they liked your concept or brand so look for ways to bring them into your system once you have determined that they are good operators. This is another win-win situation that avoids the costly litigation that will be needed to get them to cease and desist.
Twelve Tips for Your Legal Department
Bill has had over 40 years of management and leadership experience within the real estate industry. Bill has spent the majority of the last 20 years overseas in executive roles within the Century 21 system. As President of Century 21 China, Bill was instrumental making them the largest real estate network which is now listed on the New York Stock Exchange. His newest venture, Amanzani Group Ltd has consulted to major Beijing Developers on various projects.
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