Franchise Relationship Laws

Schuyler "Rocky" Reidel

Schuyler "Rocky" Reidel

Schuyler is the founder and managing attorney for Reidel Law Firm.

Reidellawfirm.com | Franchise Relationship Laws

Too many hands in the cookie jar prevent everyone from eating their fill.

Okay, what does this analogy have to do with your franchise? Plenty.

Recent laws have affected the relationship between you and potential buyers. But there is a way to meet them and still enjoy profits.

We want to educate you and reveal ways to find success.

Keep reading and let’s empower your business for long-term earnings!

How to Maintain Franchise Relationship Laws

Franchise relationship laws are the new normal. But this wasn’t always the case.

Regulations, such as the Federal Trade Commission’s Franchise rule, used to be sufficient. They strengthened the overall business both parties were a part of.

Now, operating in this new system requires more from you as a franchisor.

Updated rules for your business model:

  • Good cause is required to terminate
  • Written notice must be given to franchisees
  • You may need to pay for reclaimed assets
  • Owners must accept the sale to another in the system

On the surface, there doesn’t seem to be any benefits for your actual business. 

However, a stronger business relationship and lasting success is the eventual payout.  In the form of loyal customers who increase overall profitability for you and the franchisee. 

Plus, compliance may be mandatory in your region.  Because state franchise laws vary, seek legal aid for the most relevant to your individual situation.

Moving on, we’ll offer advice on building a good foundation.

Key to a Successful Franchisor Franchisee Relationship

Wise management of your franchise system includes fulfilling certain responsibilities. Your reward then becomes sales from your various units.

Laws at the federal level don’t constrain your relationship with a franchisee. However, those at the state level may.

And if your brand stretches across the United States, you should be consistent in reviewing any restrictions.

Factors to reinforce your partnership:

  1. Clearly articulated expectations and obligations in disclosure documents
  2. Ongoing, high-quality training and clear communication with the franchisee
  3. Mentorship that extends beyond the point of purchase

With your desire to be a good franchisor, your operations manual should also guide those who read it. Consider a freelance content writer to improve the readability.

Next, we’ll look at how proper documentation protects your business.

Franchise Agreement Obligations

Beyond outlining how you’ll get paid from royalty fees, the franchise agreement relays how services should be provided.

Important sections:

  • Any scope limitations for daily operations
  • Standards of quality that must be followed
  • Boundaries of territories to prevent encroachment
  • Terms that must be met before you sell rights
  • Protection of trademarks, copyrights, and trade secrets

Because these contracts are legally binding, each of your specific responsibilities must be apparent.

Now, let’s brainstorm steps for achieving rewards.

Best Ideas for Franchise Business Profit

State franchise laws might seem suppressive. But these rules won’t stop customers from paying your industry.

Meeting your obligations opens the door for operating your brand profitably.

3 core ways to find success and become a great franchisor:

  1. Reinvest any royalty fee into updated technology
  2. Include alternative social media in your marketing strategy
  3. Offer additional training to boost customer service

Improve Communication Across Your Franchised Business

Most franchisors succeed by adding proven tools and relevant technology. It doesn’t always pay to be an early adopter, but don’t miss the opportunities they present.

Artificial intelligence might not improve your bottom line, but project management software will. ClickUp is a popular option, but there are many more.

Communication can be streamlined within such a tool, removing the need for external options like Slack.

Franchise Brands Get an Assist From Non-mainstream Social Platforms

Big Tech is traditionally where most franchises maintain a marketing presence. We aren’t saying you need to leave them completely.

But you can renew interest in your business through alternatives. Those that focus on free-speech or champion user privacy could be a good fit.

Prospective franchisees looking to join an innovative company might find this appealing as well. Because you’d be saying, “We think outside of the box to seek other revenue sources.”

Notice Positive Changes in Customer Service With Extra Franchisor and Franchisee Training

You can fortify the franchisor franchisee relationship with conscious effort. An example might be regional meetings that renew your focus on the actual customer.

It’s no secret that service took a major hit during Covid. And it hasn’t bounced back since then.

Franchise businesses need a determined push for bolstering this fractured relationship.  Besides increased loyalty, satisfaction ratings will also rise.

In the next section, we’ll help you and franchisees get along.

Win-Win Franchisor Franchisee Relationship

Some franchise relationship laws actually hurt free enterprise.

Effects:

  • Greater regulation of services for franchisors and franchisees
  • Harder to be successful in filing states
  • You may notice that laws damage your brand’s standards
  • Franchise relationship is managed by the federal government

When a company must appease regulators over the customer, longevity is shortened. This occurs because it takes the focus off customer service. And puts it on avoiding fines.

Because it’s harder to fire a nightmare franchisee, your overall brand might receive negative publicity. And keep receiving it.

Efficiency isn’t a characteristic of our government. So, additional involvement on their part naturally decreases a portion of your franchising productivity.

Laws that assume an outside entity can better manage the relationship than the actual parties aren’t helpful.

But your desire to be successful shouldn’t suffer as a result. And it doesn’t need to.

Franchisor and Franchisee Overcoming Limitations in Filing States

By ensuring hiring standards are high before bringing on a new franchisee, you can mitigate some of the risk. Enough to enjoy profits for years and even decades.

Transparency is also key.

A prospective franchisee might see your brand as one they can get behind. If you’ve shown a past willingness to be fair.

That doesn’t mean you must sacrifice hopes and dreams in favor of the potential purchaser. But it does require you understand franchise relationship laws and meet them.

To wrap up, we’ll reveal an ally in franchising your way to a comfortable retirement.

Reidel Law Firm Assisting Franchisors and Franchisees

As experts, we can help you handle the legal aspects of any franchise issues. We help franchisors evaluate a potential opportunity so they have a full understanding and assurance of the system they build.

By effectively managing risk and maximizing opportunities for businesses we answer the needs of our clients wherever and whenever they arise.  

From reviewing a franchise agreement to supporting your small business in other ways, we’re your partner for the long haul.

Call Reidel Law Firm today at (832) 510-3292 or fill out our contact form to see how we can help your franchise system.  

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