COVID-19: What Are The Current and Potential Economic Costs?

March 24, 2020

coronavirus economic costs COVID-19 | What Are The Current and Potential Economic Costs? | Nate Riordan Seattle Franchise Attorney | West Coast Franchise Law

Each day that the coronavirus pandemic continues we receive more news of its devastating economic impacts not just in the U.S. but around the globe. Stock markets plunge, businesses close, and ordinary people are losing their jobs temporarily or permanently. The ramifications of the coronavirus will be felt long after the virus has been stopped—months and even years later. Here are some of the most probable economic costs of the current pandemic.

Revenue Loss
As governments around the U.S. and the globe mandate shops of all kinds to close and restrict the number of customers in their physical locations, cashflow is becoming a trickle or stopping completely. State mandates and consumer fear will drive some businesses to financial ruin even as others thrive. In the next six months to a year, we could find many previously strong businesses unable to pay their debts or even pay the daily operating costs required to maintain their business.

Worker Absenteeism
As more workers get sick or self-quarantine, some businesses won’t have enough people to operate normally even if they have enough orders to stay afloat. This is a real risk in the grocery retail industry as the public strips shelves bare due to panic food stockpiling. Grocers can’t restock the shelves fast enough because they don’t have enough workers available. Some grocery stores have reduced their open hours to give workers more time to restock shelves.

Supply Line Disruption
Even for those businesses that have a healthy flow of customer purchases, panic buying and worker absenteeism due to illness and quarantine could threaten the efficiency of supply lines. Instead of getting supplies in a few days it may take weeks to get an order filled by suppliers. If this happens, some customers may seek out other businesses to fulfill their needs.

Business Closure
The consequence of this pandemic is that some businesses will need to close their doors. But for those who can hold on just long enough to survive, they may benefit from restructuring their debts in bankruptcy and giving their business another chance at thriving.

Government Stimulus
The U.S. government has finally begun taking action to protect businesses. The Small Business Administration (SBA) is offering loans to businesses impacted by COVID-19. “These loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the impact of COVID-19. The interest rate is 3.75% for small businesses without credit available elsewhere and 2.75% for nonprofits. Businesses with credit available elsewhere are not eligible for this program,” the news release states. And some states are providing small grants to retail establishments who have been directly impacted by the pandemic. New forms of consumer and business relief are being proposed on a nearly daily basis during this evolving crisis.

What Can You Expect?
If you have a business that is closed and cannot operate remotely, we have no doubt that this is extraordinarily stressful and that it is very much uncertain whether you can emerge from this with an intact business.

We are happy to get on the phone with you and discuss options. Having your questions answered—or if they cannot be answered, having the opportunity to kick things around—may be helpful to you. What we are generally telling businesses worried about survival is that the best course is likely to no action at this time–just wait, while trying your best to not go into a deeper hole. Conserve cash. Reduce expenses, including laying off employees or even temporarily closing up as necessary. It is really unlikely that we are going to recommend “Bankruptcy Now.”

Everybody is on this sinking ship—debtors and creditors alike. For creditors who want their money, there are no good options. Suing is pretty much pointless right now. Landlords and banks have few options. Kicking a tenant out means an empty building. The Washington State Supreme Court yesterday directed that all non-emergency civil matters in state courts be postponed to at least April 24.

It may be that when we emerge on the other side of this, creditors are in a mood to negotiate and not litigate. Debts may get compromised and/or paid out over time without any need to resort to the bankruptcy courts. Or not. We do not know and because this is uncharted territory, we can’t predict.

For now, let us know if you want to set up a call to talk about how to handle angry creditors, how to decide what to pay or not pay, etc.

Contact the franchise attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation. 

Is Your Franchise Business Closed Due to the Coronavirus?

March 21, 2020

Coronavirus Closings: Is Your Franchises Business Closed Due to the Coronavirus? | Franchise Attorney Nate Riordan

If you have a franchise business that is closed and cannot operate remotely due to the coronavirus closings (COVID-19), we have no doubt that this is extraordinarily stressful and that it is very much uncertain whether you can emerge from this with an intact business.

We are happy to get on the phone with you and discuss options. Having your questions answered—or if they cannot be answered, having the opportunity to kick things around—may be helpful to you. But what we are generally telling businesses worried about survival is that the best course is likely to just wait, while trying as best you can not to go into a deeper hole. Conserve cash. Reduce expenses, including laying off employees or even temporarily closing up as necessary. It is really unlikely that we are going to recommend “Bankruptcy Now.”

Everybody is on this sinking ship—debtors and creditors alike. For creditors who want their money, there are no good options. Suing is pretty much pointless right now. Landlords and banks have few options. Kicking a tenant out means an empty building. The Washington State Supreme Court yesterday directed that all non-emergency civil matters in state courts be postponed to at least April 24.

It may be that when we emerge on the other side of this, creditors are in a mood to negotiate and not litigate. Debts may get compromised and/or paid out over time without any need to resort to the bankruptcy courts. Or not. We do not know and, because this is uncharted territory, we can’t predict.

For now, let us know if you want to set up a call to talk about how to handle angry creditors, how to decide what to pay or not pay, etc.

Contact the franchise attorneys at West Coast Franchise Law today at (206) 724-0846 to discuss your situation. 

Yum! Brands Acquires Habit Burger

March 12, 2020

Yum! Brands Acquires Habit Burger | Nate Riordan | Franchise Attorney

Yum! Brands, the parent company of KFC, Taco Bell, and Pizza Hut is acquiring the niche restaurant, Habit Burger for $375 million. The acquisition is poised to take Habit Burger to new heights, far beyond their 300 locations in the United States (company-owned) and China (franchises). Already the largest restaurant company on the planet, Yum! is poised to give Habit Burger access to resources they would be hard-pressed to secure operating alone. Here are some of the ways that Habit Burger with benefit from being acquired by Yum! Brands.

With the right combination of capital and strategy from Yum!, Habit Burger can potentially improve their customer offerings, expand locations, invest in quality personnel and grow their business from a niche operator to an international powerhouse.

Yum! Brands knows the restaurant business. They are the parent company of international brands such as KFC and Taco Bell so they already have the infrastructure to quickly scale Habit Burger from a few hundred locations to thousands. They have the experience, tools and connections necessary to successfully expand Habit Burger globally. Small niche restaurants may have a deep understanding of local markets but once they go beyond that they may be limited. They either don’t have access to accurate information about national and international markets or they can’t afford to hire the people who are experienced enough to pull off expansions. If Habit Burger wants to expand rapidly, they have access to Yum! resources and know-how to make that possible.

Yum! Brands has a track-record of taking brands to difficult markets.  Habit Burger will have access to Yum! branding resources that will help them position their marketing messages in the best way for specific locations. Because Yum! has such a deeply resourced marketing system, they can quickly create, test, and deploy marketing campaigns across global markets and get quick and accurate feedback about their effectiveness. This type of strong feedback loop is rare for niche restaurants who are trying to go it alone in the international market.

Right now, most of Habit Burger’s locations are company-owned. Yum! has 49,000 stores in 145 countries which comes with a franchise network with which to partner for expansion. Expansion is already on the table as Habit Burger has announced they plan to expand to 2,000 locations globally. This simply wouldn’t be possible without the Yum! franchise network and their access to credit and financing.

While Habit Burger is small relative to Yum!, the acquisition does offer some long-term growth opportunity for the large restaurant company. This is Yum’s first foray into the burger business and it could offer more opportunities for growth nationally and internationally.

Deepening The Brand
As Yum! continues its global expansion, building its burger franchise brand will deepen its connection to consumers as “burgers” are closely connected to the idea of what is “American.” And the American brand is still very popular globally. Many global consumers want to have a taste of American foods, eating burgers is one popular way to do that.

Good For Investors
Habit Burger is a strong brand. Buying into that strong brand is good businesses for investors who will benefit as Habit Burger expands and increases its customer base.

Potentially Challenging For Franchisees
Yum! franchisees wanting to diversify into hamburger concepts are now probably confined to Habit. Because Habit has so few locations, the opportunity to own multiple locations will only exist if the franchise is willing to invest significant resources and capital to development. This comes at a time when Yum!, like many large brands, is requiring a lot of development from its franchisees.


What You Need To Know About Opening A Ghost Kitchen

March 5, 2020

Burgers Sign: What You Need To Know About Opening A Ghost Kitchen | Nate Riordan | Franchise Attorney

Ghost kitchens are fast becoming the new frontier for restaurants wanting to expand their market share. Low costs for real estate and staffing are attractive features of a ghost kitchen but so too is the “delivery only” business model. As food delivery apps become more popular with diners, brick-and-mortar restaurants can find it difficult to keep up with demand especially during busy times during the day. But since ghost kitchens don’t have any dine-in capacity, they’re the perfect model for doing a delivery-only restaurant. However, there are some legal and practical considerations you need to make when you’re opening a ghost kitchen franchise and/or dealing with a third-party delivery service.

Serve Sturdy Meals

If you’re running a ghost kitchen with a delivery-only menu, make sure the items you sell can survive the delivery trip. You don’t want to sell delicate dishes that will arrive smashed or crushed. And you don’t want to sell items that can easily spoil.  If your menu isn’t filled with items that are a good fit for this delivery-only model you could find your business quickly overwhelmed with customer complaints or even lawsuits if spoiled food makes customers sick.

Get Customer Data

If you’re looking to open a ghost kitchen franchise, you should only work with experienced franchisors who have customer data that will tell you what works and what doesn’t. Ghost kitchen franchisors should have a solid track record of profits and be connected to food delivery apps that will continue to collect pertinent customer data as the business grows. This data will help you forecast what customers really want and how they are responding to your product. Remember, the ghost kitchen industry, just like the traditional restaurant industry is subject to the changing tastes of customers—you need to have the right data to forecast and respond to those changing tastes.

Choose A Good Location

If you’re opening a ghost kitchen franchise, you’re at an advantage when it comes to leasing a space. Leases are typically shorter for ghost kitchens (10-15 years) and more affordable. Just make sure that you’re in a location that is close enough to your target market that food can be delivered quickly.  Try to get a location that is close to lucrative areas such as office parks, college campuses, and wealthy neighborhoods.  Also, be sure that you understand historical traffic patterns and sports or cultural events that could impact sales and access. You don’t want to open a ghost kitchen on the outskirts of town only to discover that it takes you an hour to deliver food every week because of the traffic from sports events.

Gain Online Visibility

When you have a brick-and-mortar restaurant, you can rely on foot traffic as a way to advertise your business. But ghost kitchens will need to rely on online visibility. This type of visibility won’t come cheap and there will be a lot of competition. Before you sign a franchise agreement for a ghost kitchen, make sure that there is a solid and sufficient marketing plan. You don’t want your business to be buried by the competition just because they’re more marketing savvy than you. You must have an online presence on the most popular third-party delivery apps available and you must have a plan to protect your reputation.

Negotiate Third-Party Delivery Agreements

When you open a ghost kitchen, third-party delivery agreements are just part of the process. But you will need to consider a few legal and logistical questions:

  • Who will be ultimately liable for food that arrives extremely late (and cold)?
  • Who is liable if food safety hasn’t been maintained during delivery and a customer gets sick?
  • Do you have tamper-proof packaging to ensure that your food is delivered the way you intended?
  • Does the third-party delivery service charge the customer a service fee? If so, how will this impact the royalties you pay the franchisor?
  • Does the third-party delivery service charge more for your food on their platform? If so, how does this impact your franchise agreement?
  • What is the service area of the third-party delivery service? Does that service area conflict in any way with territorial boundaries in your franchise agreement?

As you explore their-party delivery options, make sure that you negotiate menu prices, delivery methods, routes, prices and the use of your trademarks and logos. You should also consider negotiating an exclusivity agreement where the third-party delivery service provider does not deliver food for restaurants that are in direct competition with your business.

If your business is a franchised restaurant, legal and contractual constraints exist around whether you can open a ghost kitchen.  Those constraints vary depending on the terms of your franchise agreement, the franchise systems policies with respect to whether you can open a ghost kitchen and the franchise system’s policies. Please consult with us right away if this is your situation and this is something you are considering!

How To Read A Franchise Disclosure Document

February 27, 2020

How To Read A Franchise Disclosure Document | Nate Riordan | Franchise Attorney

When considering the purchase of a franchise business, the Franchise Disclosure Document (FDD) is one of the key documents you should review before making a decision. FDDs contain essential information about the franchise business that will give clues about whether it is a good (or bad) investment. But you need to know what to look for and how to interpret the information you find. Let’s take a look at how to read a Franchise Disclosure Document.


A Franchise Disclosure Document is broken into 23 sections with information that will give you insights into the most important aspects of the investment worthiness of a franchise. In this guide, we will cover the most important information and where you will find it in the FDD.

Franchise History

If you want to know the future of a franchise, you must look at the history and ownership.  Sections 1 (franchisor and any parents, predecessors, and affiliates) and Section 2 (business experience) will let you know how many times a franchise has been sold, who really owns it, and the business experience of key people. This is especially important if you’re buying a franchise that is new or that has had a turbulent history. These first two sections of the FDD will allow you to dig deeper and see the details behind the business’ past and present.

Franchise Outlets

Before purchasing a franchise you need to make sure that there is a track record of franchise outlets opening, staying open, and thriving in the system. You will need to look at the number of outlets and their financial health. Go to Section 20 (outlets and franchisee information) where you will find how many outlets opened and closed over the past three years as well as how many were terminated or didn’t renew their contracts. Obviously, if you notice that the majority of outlets fail to renew their lease after a year or two, it’s a red flag that the system may not work for the majority of people.

Litigation and Bankruptcy

While it is true that even the best and healthiest franchises will eventually have litigation issues, too much litigation especially for a small system is usually a red flag. All franchisors are required to disclose on their FDD any litigation that happened in the past five years.  You can find that information in Section 3 (litigation).  Of course, you should always get the story behind the numbers as there are situations where litigation is just a natural part of a franchise’s recovery from hard times. Once you have the litigation story sorted, you should go directly to Section 4 (bankruptcy) to find out if a franchise or one of its key owners has needed to restructure their debts. If the bankruptcy is more than 10 years old, it’s probably nothing to worry about. But if President of the franchise has filed personal bankruptcy in the past few years, it is probably worth having a discussion about why. Even if the business is financially healthy, the personal financial problems of key people in the business could bleed over if not managed correctly.

Franchise Financials

In Section 21 (financial statements) of the FDD, you will find the franchisor’s financial statements. Healthy franchises will make a good percentage of their income from ongoing royalties and a smaller percentage from the sale of new franchises. The exception to this rule is when a franchise is fairly young. Any established franchise that makes the bulk of their money from selling new franchises not royalties is probably not in a healthy financial state.  And while you’re reviewing the franchisor’s financial health, take a look at Section 19 where you should find financial performance representations that will give you a good idea of what you can expect in terms of sales and profits if you decide to buy a franchise. Be forewarned that Section 19 is not required by law but if you buy a franchise without this information you are going in at least partially blind about past sales and profit performance.

Estimated Initial Investment

In Section 7 of the FDD you will find information on the estimated costs you will need to take on to become a franchisee. This estimate will not include the initial franchise fee but will include other costs such as equipment, real estate, signage and marketing. This is really important because it will help you determine if you have enough capital to invest or if you will need to raise additional capital to move forward.

Fees and Expenses

Royalties paid to the franchisor will be one of the biggest ongoing expenses you will have as a franchisee. This is why Section 6 of the FDD is critical so review this section carefully. How much are the royalties and other fees and expenses? And how close are these fees and expenses to the industry standard? How much profit will you take home AFER you’ve paid the franchisor their due? These are critical questions to answer carefully and honestly as this will help determine just how profitable your business is after all expenses are paid.

Restrictions On Products and Services

In Section 8 of the FDD, you will find any kind of operating standards and restrictions you will be required to follow. Read this section carefully because there may be restrictions on what vendors you can do business with or other controls that impact how you do business in unexpected ways.

Renewals, Termination, and Disputes

Section 17 of you FDD will let you know under what circumstances a franchisor can terminate your contract and how disputes are resolved. Does the franchisor require arbitration? What is process for appealing a decision? Just how fair are the dispute resolution terms? How a franchisor handles problems with a franchisee is a good sign of whether or not they will play fair with you overall so take a good look at this section.

Will That Franchise Marketing Program Deliver Results?

February 20, 2020

Will That Franchise Marketing Program Deliver Results? | Nate Riordan | Franchising Attorney

Centralized marketing programs are powerful tools for franchisees. Not only do they provide a streamlined way to market, they make it easy for franchisees to reach a wide audience at a reasonable cost. But if you want to get the most out of a franchise’s marketing program, you must make sure that they have a strong and effective system. Here’s what you need to know.

Centralized Marketing Program Benefits

The biggest benefit of any franchise’s centralized marketing program is the economies of scale. By pooling their ongoing financial contributions, a collection of franchisees can run marketing campaigns they couldn’t afford if they were working as individual entities. For example, television advertisements, national radio ads, and massive online ad campaigns can quickly become too costly for a single franchisee. By working together, franchisees can reach a larger market share by using powerful and expensive marketing tools for a reasonable fee. Here are some other benefits:

  • Centralized administration.
    Hiring vendors, buying space, and tackling design and branding can all be handled by one entity instead of each individual franchisee.
  • Lowered expenses.
    By purchasing large printed quantities of materials or services in bulk, the franchise can secure lower prices than an individual franchisee.
  • Unified brand.
    When one entity controls the branding for the franchise, all marketing sends a uniformed and more powerful message about what the company offers customers.
  • Access to more data.
    When the franchise runs campaigns they can see all data collected from customers from across all regions. This allows the franchise to see customer trends and understand what’s working or not working. It can even give insights into what products or services they should offer in the future.

While there are some solid benefits of a centralized marketing program there are some drawbacks potential franchisees should think about.

  • Failure to meet local needs.
    Sometimes centralized marketing programs fail to create marketing materials/campaigns that speak to local needs. This is usually the case with marketing programs that have been poorly implemented.
  • Top-down strategizing.
    All centralized marketing programs usually have one department that makes the final decision on marketing strategies. But well-run programs listen to franchisees. However, the potential drawback of this type of marketing system is that sometimes the “top-dog” in the administrative office fails to take seriously the suggestions or needs of the franchisees that are depending on them.

Best Practices

When you’re looking to buy a franchise, you need to make sure that their centralized marketing program is following best practices. Here’s what you should look for:

  • Campaigns drive customers.
    When it comes to marketing “building it” doesn’t guarantee that customers will knock on your door. Make sure that the franchise’s past marketing campaigns have been effective in delivering customers to franchisees.
  • Listens to franchisees.
    No one is better qualified to strategize about marketing than those who understand the customers. Smart franchises understand that franchisees are the people who are closest to the customers not someone in headquarters. That’s why some franchises have systems set up to receive franchisee feedback and suggestions about marketing campaigns, branding, and marketing materials. And many franchises have “franchisee advisory boards” in place so that there is a standing committee that will speak on behalf of franchisees when marketing strategies are being created. If a franchise has no system for receiving franchisee feedback and suggestions for their marketing, this is a serious red flag that the centralized marketing program may be failing to meet franchisee needs.
  • Makes good investments.
    The trick to marketing is putting your money in the right place so that you get the type of results you need. Some franchise marketing programs get this right while others fail miserably. There are three main areas of investment where marketing dollars must go:

    • Administrative.
      Paying salaries, agency fees, and other expenses related to administering the marketing program.
    • Advertising materials.
      Paying for the creation of all marketing materials such as printed ads, brochures, radio ads, television ads, and online ads.
    • Placement.
      Paying for the spots where materials will go such as magazines, websites, television or radio stations.

There is no magical number for getting this investment split right. The investment portioning that works is the right one at the time. However, there are some investment splits that are so lopsided that you know immediately that it’s off. So, for example, if you notice that 80% of all marketing investments go into administrative expenses, it’s probably an ill-managed program. In any case, don’t be afraid to ask questions when something seems off.

  • Franchisee satisfaction. Pick up the phone and ask existing franchisees how they feel about the marketing program. Are campaigns delivering the results they expect? Are they listened to? How do they feel about the marketing investment split? Many franchisees will be quite upfront with you about their experiences. If you notice that the majority of the franchisees are dissatisfied with the marketing plan, it’s a bad sign.

While no franchise is going to let you pore over the details of their marketing system document, you should ask them about it and ask to see the table of contents. How long have they had a written marketing system? How extensive is it? Do they have effective systems set up to support franchisees? The most important thing is that this document exists and that the franchise has a proven system for marketing their brand. If they don’t have a written document for their marketing system this is a huge red flag.

If you’re looking for a franchise that has a strong marketing program, take the time to investigate and ask the right questions.

Strong Business Infrastructures Create Profitable Franchises

February 13, 2020

Building Blocks: Strong Business Infrastructures Create Profitable Franchises | Nate Riordan | Franchise Attorney

Franchisors trying to expand and allow their franchisees more opportunity for growth and increased market share must have a solid infrastructure in place. A strong infrastructure will provide franchisees with the tools needed to effectively execute the business model and present a consistent brand image for consumers at every stage of interaction. Let’s take a look at the foundational elements every franchise needs for long-term and national/international success.

A Strong and Consistent Brand

Every franchise needs a strong brand that distinguishes itself from competitors and that is consistently applied throughout the business. Good branding increases customer loyalty and reduces market confusion while keeping down costs for franchisees. As a foundational practice, franchises should develop a unique logo and go through all the necessary legal steps to ensure that no other business can copy it and fraudulently sell counterfeit products or services under the same or similar logo. Strong branding will also help protect the franchisee’s investment by increasing the loyalty of consumers and making it easy to recognize the company.

Franchise Support

Franchisors with strong support systems can improve franchisee success rates. Support such as new product development, public relations initiatives, advertising assistance, approved suppliers list, and billing and collections can go a long way in helping the franchisee run their business in a systematic and effective way. Franchisees can also benefit from onsite visits where franchise consultants advise them about issues that can only be seen via an in-person experience. Here are some specific examples of how franchise support infrastructure can help franchisees.

  • Provide ad copy for advertising campaigns. No matter how strong a brand is, every franchise will need to participate in ongoing advertising campaigns to raise awareness about their business.
  • Provide maintenance support for technology systems used in the franchise. For example, a travel franchise might receive technical support for their reservations system.
  • Provide payroll services to the franchisee. An experienced payroll team can make employee payment and payroll taxes easy to handle.


Strong franchisors also provide ample training opportunities for franchisees. Good franchisee training systems include the following key elements:

  • An operations manual. The operations manual is like a textbook that will help ensure quality control for all franchise units. Good operations manuals will instruct the franchisee on how to operate the franchise even if they have zero experience. This ensures that franchisees don’t operate on assumptions and that they keep things consistent across the brand. An operations manual will also help enforce system standards since there will be a quantifiable way to measure quality.
  • Headquarters training. To further ensure brand consistency and quality, every franchisee should go through training at the prototype franchise. During their headquarters training, franchisees can gain a deeper understanding of the brand and culture and make connections with headquarters personnel.
  • Onsite training. In addition to training at the headquarters, franchisees should train onsite and that training should be tailored to their level of experience and knowledge. Onsite trainings should be adapted to the location and they should focus on improving the success of the franchisee in their day-to-day operations.

As a franchisee becomes acclimated to a franchisor’s system via training, it can be easy to forget key details, this is why having onsite support during the first week of operations is key to ensuring a successful opening.

Legal Services

Even if a franchisee does everything by the book, it’s almost inevitable that they will face legal issues or have questions. It’s important that a franchisor provide some legal support for their franchisees so that the advice they are getting comes from attorneys who understand the franchise business and the franchisor’s brand specifically. Providing some type of legal support is critical to reducing potential liability for the franchisee and the entire brand. When it comes to legal issues, an ounce of prevention really is worth more than a pound of cure.

Vetted Suppliers

One of the powerful ways that franchisors support franchisees is through their supplier infrastructure. By providing a list of vetted suppliers to franchisees, they can leverage their collective purchasing power to get discounts on products, supplies, and services. These discounts allow the franchises to offer better prices and increase their profit margin.

Professional Services

For franchisees who want to fully leverage the support infrastructure provided by the franchisor, bringing on an experienced consultant may be a smart choice. Working with experienced consultants can really benefit new franchisees who may want to avoid some of the common pitfalls they may not notice because of their lack of experience.

Powerful Systems

Franchisors who have strong systems that they constantly improve are better positioned to help franchisees expand and become more profitable. For franchisees, it’s important to make sure that a franchisor’s systems are actually scalable. The easiest way to do this is by watching how effectively other franchisees have expanded with the brand. But in the case of newer franchises, franchisees will need to do a lot of research and have a basic understanding of how the best systems work. There are two important things to remember about systems:

  1. Good systems are scalable.
    You can easily have two people working on the system or 200.
  2. Good systems are relatively easy to use.
    Good systems should be simple and just about anyone should be able to learn to use it.

If a system has both of these characteristics it probably has a very strong foundation.

The success of any franchise business is depending heavily on the business infrastructure that has been created.

How To Build Business Relationships For Your Franchise

February 6, 2020

Handshake: How To Build Business Relationships For Your Franchise | Nate Riordan | Franchise Lawyer

When most franchisees think about running a successful business, they think of controlling expenses, increasing revenue, and maximizing profits. But there’s another side to running a successful business—building important business relationships. If you want to have a long-term, sustainable and financially successful business, you must nurture your most important relationships.

Business Relationship Types

Customers. Your customers are the most obvious business relationship type, without them your franchise would simply not survive. When you’re building relationships with customers you should think about the following:

  • Attracting new customers. When you first interact with someone who has never heard of your business before, it’s important to make a good first impression. Show them what value you’re delivering and why they should choose you over competitors.
  • Listening. Once you’ve won someone over as a customer, listening to their concerns and wants is critical to keeping them. Setup a process where you can collect candid feedback, and make adjustments to how you’re doing business so that you’re constantly improving.
  • Customer service. When you’re a franchise owner, you benefit from established and battle-tested processes that can make running a successful business easier. Use established processes to keep your customer service quality at the highest levels. Even one bad interaction can turn a customer against your business, so put into place a process for quickly responding to negative feedback.
  • Reward systems. Be sure to leverage any loyalty reward systems available through your franchise. Customers are more likely to return if they know you appreciate their business.

Employees. Good help really is hard to find, and most franchise owners don’t realize that until they’ve been tasked with replacing a very high-quality employee. Your relationship with your employees will make a huge difference in the long-term health of your business because keeping your best employees around long-term is pivotal. Take the time to invest in your employees’ personal and career well-being so that they’re not only motivated to remain with your business but they will recommend you to other people looking for work. Having a reputation as a good employer will make it easier for you to hire good quality people even when better-funded competitors offer higher wages. Many high-quality employees are willing to work for less if they can work in a healthy workplace environment and they have opportunities for advancement. Here are a few basic things you can do to improve your relationship with employees:

  1. Provide fair wages.
    Good employees won’t stick around if they’re not paid fairly. There are always other employers willing to pay a premium for excellent workers.
  2. Create transparent policies.
    Communicate expectations clearly and in writing so that there is no confusion about what you want from employees.
  3. Keep out toxic individuals.
    People who create drama, pick fights, or engage in other toxic behavior will kill your business faster than a recession. Once you realize that someone is toxic, remove them from your workplace.
  4. Offer recognition and money.
    Never take excellent work for granted, take the time to recognize employee excellence systematically through annual bonuses or “employee of the month” type programs.

Maintaining positive relationships with your employees is a profitable strategy.

Vendors are more than just “the help.” They are an important part of your growing franchise. You must take the time to find out how vendors can better serve your business goals and be careful to treat them with the respect they deserve. This means paying vendor invoices in a timely manner and communicating professionally even when you’re dissatisfied with a service or product. When you’re building a relationship with a vendor this is what you should consider:

  • Quality
    Look for vendors who can meet your quality demands.
  • Capacity
    Build relationships with vendors who can deliver what you need at the scale you want.
  • Growth
    Consider if your vendor can grow with you as your business expands.

Even if you’re not quite ready to take on a vendor, always keep an eye out for vendors who can help you reach your future goals.

One of the relationships some franchisees fail to nurture is their relationship with colleagues. Nurturing relationships with other franchisees and individuals working in the industry is important. People in the same industry as you can provide valuable insights into the industry trends, news, and developments that simply can’t be found in an internet search. To continuously build your relationships with colleagues, join industry organizations and attend industry events, this is where you will build valuable connections that will serve your business in ways you can’t imagine.

The right business loan can transform your franchise business from small and just getting by to expansive and thriving. This is why properly nurturing your relationships with lenders is critical to your success. The first step to doing that is working with a lender you trust and that believes in the long-term viability of your business. Then you should stay committed to keeping your promise to repay the loan according to the terms you agreed to. You should also share your business objectives with your lender and find out how they can help you reach your goals at each step in your development. If you’ve made some major advancements feel free to share the news with your lender’s contact person.

Other Strategies

No matter what type of business relationship you’re nurturing, there are some general strategies that can help you maintain and grow the relationship.

  • Be authentic. Not that you have to let “everything hang out” but you should be your best self. Feel free to share aspects of your life you don’t mind being public and be willing to listen to the challenges and accomplishments your business contacts want to share.
  • Share the knowledge. If you have valuable information you believe may help a business contact, don’t be afraid to share it with a little note. Once you’ve established a pattern of sharing valuable information, your business contacts will begin to see you as a valuable resource they want to remain connected to.
  • Share your contacts. If you’re well-connected, you might be surprised at how many may benefit from your introductions. When you notice potentially valuable connections, don’t be shy about making introductions.

Treat your business relationships like a valuable resource so that your business can benefit for years to come.

Well-Rounded Employees Are An Antidote To Toxic Workplace Culture

January 30, 2020

Warning Sign: Well-Rounded Employees Are An Antidote To Toxic Workplace Culture | Nate Riordan | Franchise Attorney.jpg

Work-life balance is a buzzword muttered by even the most overworked business executives and employees. But what does work-life balance really mean and why is it critical to business success? When employees and business executives talk about work-life balance they focus on the amount of time spent in the office in proportion to the amount of time spent doing other just as worthwhile activities unrelated to work. But what work-life balance is really about is being a well-rounded employee who understands that having a life outside of the workplace is critical to productivity, career success, and a satisfying life. But what does that look like? And why is it important that business owners focus on hiring well-rounded employees who have a healthy attitude towards work-life balance?

The Out-of-Balance Employee

When we talk about workplace bullies we rarely see the connection to how an out-of-balance employee who has an unhealthy relationship with work can present as bullies who care very little about others. The truth is that an out-of-balance employee may in fact suffer from a skewed perception of their place in your organization. An out-of-balance employee is someone who spends too much time working and not enough time tending to their personal life.

On the surface, it may seem that this is good for a business’ bottom-line but when you look closely this attitude can be costly. Out-of-balance employees aren’t superhuman, they eventually burn out, breakdown, quit or get fired because they’re simply ineffective. Out-of-balance employees neglect their spouses, their children, and their health. This is the employee who won’t schedule their yearly healthy checkup because they don’t have time due to their busy schedule. This is also the employee who will leave weeks of vacation time on the books year after year because they don’t want to be seen as slacking.

They must always be perceived as the most productive and the most committed. And because they neglect self-care and have no time to recharge they can become easily agitated and overly competitive and combative with other employees. In the end, the out-of-balance employee may be more willing to stay late and take on extra work but they’re also more likely to contribute to a toxic workplace culture that drives even your most loyal employees out the door. And this out-of-balance employee may not always present as a bully, sometimes they present as a workplace martyr which can have its own negative impact.

Dangerous Workplace Martyrs

The workplace martyr is another type of out-of-balance employee who can unwittingly harm the culture of your business. The martyr is always looking to go above and beyond but often in a way that doesn’t cultivate teamwork or mutual trust and respect. Below are some signs of a workplace martyr:

  • They are always stressed. No matter how slow business is at the moment, the workplace martyr is always stressed because they are constantly busy doing things that they could delegate to someone else.
  • They micromanage. Even if you’ve invested in skilled employees to help lighten the workload, the workplace martyr doesn’t believe that anyone can do the job as good as they can. They nitpick at everything and may even redo good work because they believe it is imperfect.
  • They never ask for help. Workplace martyrs always do everything themselves. They believe that if they’re asking for help they’re not doing their job. And even if they ask for help, they may not fully trust the person helping them to do a good job.
  • When you have even one workplace martyr as an employee this can harm employee morale, foment distrust, and drive away good talent. And if the rumor mill gets going about your toxic workplace culture it may be next to impossible to find healthy employees willing to work with you especially in a booming economy.

Cultivating Balanced Employees

We’ve talked about what an out-of-balance employee looks but what can businesses do to cultivate a more balanced relationship to work? Let’s take a look at some concrete strategies to ensure that you hire and retain well-rounded employees who will contribute to your business for years to come.

  • Act as an example. Founders and CEOs are often guilty of having out-of-balance work lives. And when you’re trying to build a company from the ground up or when you’re trying to push past obstacles that keep your business from reaching its full potential being the workplace martyr can feel necessary. But if you want to attract and keep well-rounded employees, you must serve as an example of what work-life balance looks like. You should keep decent business hours, enjoy your time off, and be willing to delegate responsibilities to the employees you paid to help you.
  • Offer flex-time. Life happens every day of the week, not just on Saturday and Sunday. This is why offering employees work from home options can make it easier for them to remain well-balanced and take care of the important life issues that inevitably come up. This will require you to trust your employees and to have a clear idea of what essential work they’re supposed to complete whether they’re in the office or working remotely.
  • Give employees autonomy. Micromanaging the work of employees is the easiest way to discourage them and send them looking for other opportunities. By giving your employees the autonomy to decide how to do their work, you give them a chance to become more productive. They will have an incentive to figure out a way to complete work tasks in a more effective and efficient manner without burning out.
  • Develop “life first” policies. Let’s face it, we have a workaholic culture that rewards out-of-balance behavior with lots of praise and awe. If you want to cultivate well-rounded employees, you must put in place “life first” policies that allow an ample amount of personal time and that mandates a certain amount of time off each year.

Businesses that value a healthy work-life balance will have less turnover and a happier workforce.

Funding Your Franchise At Any Phase

January 23, 2020

Funding Your Franchise At Any Phase | Nate Riordan | Franchise Attorney

Getting enough funding for your franchise is critical if you want a fighting chance at success. If you fail to raise enough capital you could run out of cash before you can make a profit or you may miss opportunities for growth because you don’t have enough cash to expand. This is why franchisees should strategize about funding whether they’re a start-up or an established business.

New Franchisees

If you’re a new franchisee opening your first location, don’t overlook the importance of covering all your basics for at least the first six to twelve months. You need to cover at least your essential fixed and ongoing costs such as:

  • Rent
  • Employee salaries (including your own)
  • Supplies
  • Insurance
  • Taxes
  • Royalty and advertising fees
  • Emergencies

Essential costs are expenses that are absolutely critical for your business to run. It’s important that you do not include non-essential costs on this list. Non-essential purchases can be delayed until after your franchise begins to make a profit.

The costs for funding your startup franchise will vary depending on the type of franchise you’re running. Take a look at your documentation for your franchise to get startup cost estimates then make a plan for raising or self-funding the seed money you need to get started.

Funding Sources

As with any business, franchisees have access to the typical funding sources such as bank loans and credit cards but they also have access to franchise-specific funding sources. Let’s take a look at funding sources franchisees should consider:

Traditional Bank Loans
Every business has access to traditional bank loans if they qualify. And while it’s true that going to a bank for a loan means you will need to meet their high standards, the Small Business Administration (SBA) reported that franchises were 15% more likely to receive a bank loan than other types of businesses. Many banks are more open to funding franchises that are connected to a brand with a long track record of success. In their eyes, franchises are less risky.

Franchisor Discounts
Some franchisors will help fund you by discounting their franchise fees or partnering with you to get a loan.

SBA Loan
You can apply for a small business loan through the SBA. The SBA has a franchise registry with hundreds of vetted businesses. And if your franchise is on the registry, it may be easier for you to get an SBA loan.

Franchise Specific Lenders
There are lenders who specifically lend to franchisees. Consider investigating this option and comparing the rates and terms to find the best match for your situation.

Angel Investors
There are thousands of business owners out there looking for opportunities to invest in businesses. If can prove that your business plan is viable, they may be interested in investing in your business.

Credit Cards
If your startup funding needs are small, credit cards may be a viable funding option. Just beware of the interest rates. Credit card interest rates are much higher than interest rates on a typical bank loan.

Friends and Family
This may be one of the easiest ways to fund your business in the beginning especially if your friends and family trust your business sense.

401K Rollover
Potential franchisees can use their 401k to invest in themselves.  This is a commonly used path to business ownership. The details are complicated and best left to companies specializing in this type of arrangement. The fees are reasonable and the process is straightforward as long as you are using a specialist.

You don’t have to always look to external sources for funding your startup, dipping into your savings is a legitimate funding strategy that has been successfully used by many business owners in the past.

A few notes of caution:

  • Establish boundaries. If you’re borrowing money from your friends and family, use written agreements with clear boundaries around what the ‘investors” can expect from you. In the case of a family or friend loan, be clear about when repayment is due and what risk, if any, the investors are taking.
  • Don’t risk your financial solvency. When you’re self-funding, make sure that you’re not recklessly jeopardizing your life basics such as housing. If you’re taking out a loan against your home, have a plan for what will happen if you’re unable to pay it back in the time you agreed.
  • Read the fine print. When you’re desperately trying to fund your franchise, it can be tempting to take any offer on the table from banks and investors. However, you could be jumping out of the frying pan into the fire if you don’t understand the terms you’re agreeing to. Work with an advisor who understands franchise financing and contracts to ensure that your investor and loan agreements are fair and reasonable.

Established Franchises

If your franchise has been running for a year or more and you need funding for new equipment, expansion, or other opportunities, it may be easier to find funding. Traditional lenders may be more likely to fund your franchise if you have an established track record of financial performance and a good credit history. But even if you qualify for a traditional bank loan, you should also take a look at franchise-specific funding as they may offer competitive rates.

What Funders Look For

Whether you’re applying for a traditional loan or looking for investors, there are certain qualities that funders are searching for.

  • Industry experience. When you’re asking for funding, lenders and investors want to know that you understand your industry and have a track record of success. The more experience you have, the better.
  • Financial performance. If you can prove that your franchise brand has a track record of financial performance, getting funding may be easier even for a new startup. If you’re an established franchise, proving that you have been profitable can open many funding doors.
  • Effective business plan. One of the benefits of being a franchisee is that you have access to a business plan that has been proven effective. This effective business plan will count heavily in your favor as you seek funding.
  • Market share. Funders will want proof that you have enough of the market share to be profitable and expand.
  • A clear financial benefit. If you’re looking for investors, they will want to see clearly how they will profit and how quickly. Work with a franchise expert to make sure that your investor agreements work for all parties involved.

Even if you’re not currently looking for funding, knowing your funding options and being prepared to seize funding opportunities is critical for your business success.