Trademark Lawyer Blog

Earlier this year, Cuppy’s Coffee, a franchise founded in Florida but later moved to Alabama, simply disappeared into oblivion leaving nearly two hundred franchisees without a franchisor. A warrant for the CEO of Cuppy’s, Robert Nabors, was issued in Okaloosa County, Florida, in March of 2009. Some of the investors now face bankruptcy as a result of investing hundreds of thousands of dollars in the franchise but never even getting to open their business. Cuppy’s took the franchisees’ money but, never built their stores. From the start, Cuppy’s was a questionable franchisor; Cuppy’s grew out of the failed franchise, Java Jo’z.

Cuppy’s isn’t the only franchisor to be hit with lawsuits in Florida; I recently posted a blog discussing The UPS Store franchisees suing UPS alleging it withheld information from franchise purchasers regarding profitability. Another franchisor sued by its franchisee is Cold Stone Creamery, which was sued by a Tallahassee, Florida, franchisee on claims of fraud related to the store’s profitability.

I find the continuous stream of investors in franchises and other business opportunities who buy into risky and questionable businesses both startling and saddening at the same time. The most important thing a potential franchisee can do is research the company; that means researching other sources of information about the franchisor and not just relying on information provided by the franchisor itself. Potential franchisees can look to sources such as, franchise magazines, franchise blogs, franchisee associations, and talk to current franchise owners to find out things like what kind of support, feedback, and dispute resolution the franchisor provides. In addition before signing any Franchise Agreement a potential purchaser should seek counsel from an attorney experienced in franchise law.

In Jacksonville and northeast Florida we have just about all of them—McDonald’s, Starbucks, and Dunkin Donuts; I am talking about the major franchises in the growing business of selling specialty coffee drinks. Recently, I posted a blog on succeeding in difficult economic times by finding a niche (Lucrative Niches +Established Marketplaces =Better Chances for Franchise Success). In that blog I explained that one way to be successful in a tough economy is by finding a niche that separates your company from the other businesses in the same market.

In this blog I would like to show you how the few franchisors I already listed, along with Tim Hortons and Caribou Coffee, a couple of the other major players in the specialty coffee market (neither of which have locations in Jacksonville), use their niches in the coffee and food chain restaurant business to compete. Here is a brief explanation of what helps each of them succeed in garnering a portion of the market share.

McDonald’s, the largest franchisor, uses its buying power to provide the product at a slightly cheaper price and sells it along with its wide array of breakfast and burger meals.

Starbucks is probably the originator of the specialty coffee boom, so it can rely on the fact that it was the first in the market and that it is primarily a high-end coffee business.

Dunkin Donuts combines its primary product, donuts, with coffee to reach its particular market, and prior to Tim Horton’s entering the marketplace, Dunkin Donuts, was the only one of these businesses offering its customers a wide array of donuts. Dunkin Donuts has recently added breakfast sandwiches in order to compete with McDonald’s and Tim Hortons.

Tim Hortons, like Dunkin Donuts, sells a wide variety of donuts, but it also sells breakfast sandwiches and other foods, including soups and lunch sandwiches.

Caribou Coffee, the only other primarily high-end coffee focused chain besides Starbucks, competes by selecting smaller unexploited markets to locate its stores, avoiding direct competition with Starbucks.

Whatever your business is, you can still find a way to compete in a crowded market by finding your niche. Drop me an e-mail and let me know what you think. As always, I look forward to hearing from you.

Miami, Florida based burger franchisor Burger King, the second largest burger food chain in the United States, recently announced it plans to remodel and redesign its 12,000 restaurants worldwide. The 20/20 design—and no, that is not the popular ABC news program’s design—is a determination by Burger King to provide a look that is “contemporary, edgy, and futuristic.” The cost of the remodel and redesign isn’t cheap; franchisees will have to spend between $300,000 and $600,000 for each restaurant. Some of the new design aspects include rotating-red-flamed chandeliers, TV-screen menus, brick walls, and industrial-inspired corrugated metal. The good news for franchisees is that Burger King restaurants already remodeled with the 20/20 design have reported increases in sales between 12 to 15 percent, and some locations that have completely rebuilt their restaurant using the new designs have had sales increases as great as 30 percent.

Ninety percent of Burger King’s restaurants are franchisee owned, and by contract they are required to update their restaurant. Just like Burger King’s franchise agreements, most franchise agreements require franchisees to make upgrades at certain intervals. Thus, it is a contract term that becomes vitally important to franchisees and potential franchisees when they are entering into a franchise agreement. All kinds of issues must be considered on the franchisees part; for example, what are the costs of upgrades, are the upgrades optional or required, who will provide financing if the upgrade will be costly, and what if the franchisee cannot obtain financing? An attorney experienced in franchise law can help you sort through all of these concerns and ensure you, as a franchisee, know exactly what your obligations will be.

Desperate to draw in more ticket sales, the Jacksonville Jaguars are considering hosting games in Orlando in upcoming seasons. Jags owner Wayne Weaver is keen on expanding to Orlando and tapping into a population that is underserved football-wise.

While it is important for a franchise to expand its fan base in the hopes of increasing revenues, it shouldn’t lead to dilution of the team's identity and the undermining of home field advantage. Jags management should be focused on bringing in the right personnel now rather than marketing.

Good coaches and a good GM will bring in good players who will make the team better which will naturally lead to better attendance! The key to any solid business is turning out a first-rate product. I really don’t think that the Orlando move can be seen as a positive development. It smacks of desperation by the ownership!

Does this plan worry you as a Jags fan? Please post your comments or contact me to discuss!

Looking to purchase a franchise? In today’s marketplace there are hundreds of businesses to choose from if you want to purchase a franchise. So how do you narrow the field and find the right franchise for you? Consider these few items.

First, what kind of business are you interested in? The selection of franchise opportunities to choose from is as vast as the goods and services available on the market today—from haircuts (Great Clips®)to cleaning services (Jani-King), to package shipping (Postal Connections ™), to restaurants (Baskin-Robbins ®). You should find a business that interests and excites you, so that you can combine passion and profession.

Next, how much is the initial investment? Franchises can range from several thousands of dollars on the low end to over a million dollars on the high end. Usually there is a correlation of the cost to gross sales and profits, but that's not always the case. For example, McDonald's restaurants, cost one to two million dollars for start up and do an average of over two million in gross sales annually, profiting typically in the six figure range.

The best way to gauge financial success is to meticulously go over the Franchise Disclosure Document with a franchise lawyer, a business and franchise consultant, and an accountant. To that effect, an established franchise, such as McDonald’s or Baskin-Robbins ®, may have more predictability when it comes to success than a new franchise; however, a newer franchise opportunity may have more room for growth.

Hopefully, these tips will give you a starting point ifor thinking about a business or franchise investment.

A Tallahassee, Florida, Saturn dealer filed suit against General Motors Corporation earlier this year for violating Florida’s franchise laws, but Saturn of Tallahassee’s chances of prevailing are not likely. The dealership is co-owned by former NBA player Bob Sura. General Motors announced earlier this year that it plans to sell or eliminate the Saturn brand sometime in 2009, and cut nearly 2,400 dealerships from its network of dealers. After seeing sales drop over 70 percent this year at his Saturn of Tallahassee dealership, Sura feels that General Motors has made his Saturn franchise worthless. In effect, the Saturn of Tallahassee dealership feels it has been wrongfully terminated.

The problems for Saturn of Tallahassee in prevailing in its lawsuit against General Motors lie in the fact that General Motors is now in Chapter 11 bankruptcy and may simply terminate the franchises as part of its restructuring process. If so, Sura and his dealership may be left to accept whatever decisions the Bankruptcy Court makes. Sura and other Saturn dealers’ best hope may rest upon finding a new buyer for the Saturn brand and maintaining the goodwill it has developed with its customers over the years; several groups have expressed an interest, including some Saturn dealers.

Auto dealership franchises have to make some of the largest investments of all franchise opportunities available on the market. Like all franchisees the money they spend in advertising and building goodwill benefits the franchisor as well as their own franchise. When a franchisee is in compliance with the franchise agreement and is wrongfully terminated or denied the opportunity to renew their franchise, the franchisee has lost the value of their investment.

If you have experienced franchise renewal problems with your franchisor, or you just have questions about franchise agreements in general, ask an attorney for help.

Several former Mail Boxes Etc. franchisees in Florida have been certified as a class, in their California lawsuit against UPS. The Superior Court for Los Angeles County certified the class-action lawsuit in July. The suit was brought by over a hundred former Mail Boxes Etc. franchisees. Known as the Platinum Shield Association, they have claimed that UPS, since acquiring Mail Boxes Etc., has destroyed what was once a growing, stable, and profitable franchise. The former Mail Boxes Etc. franchise owners claim that UPS coerced them into changing from their profitable Mail Boxes Etc. Centers to The UPS Store through a program called “Gold Shield.” They also say UPS then tried to destroy the remaining Mail Boxes Etc. franchises that refused to change to The UPS Store by discontinuing national advertising and stopping all support for the Mail Box Etc. franchisees.

Another group of unhappy UPS franchisees is the Brown Shield Association, and they are also litigating against UPS, alleging that UPS has engaged in competition with its own franchisees by offering lower prices to customers who use direct-pickup instead of dropping of packages at local The UPS Stores. Both groups face long fights before their cases will ever see an end. The case led by the Platinum Shield Association started in 2003 and is just at the point of sending out notices to potential members of the class action.

What do you do if you own a franchise and the franchisor sells to another company? Are you obligated to accept changes in your Franchise Agreement? Disputes can be complicated, costly, and take a long time to resolve. If you are purchasing a franchise or you own one already these are issues you might want to find out about by talking to your franchisor and a franchise attorney.

Is it actually true that a franchise was terminated over one under-portioned sandwich? In a case that was finally decided at the start of this year, it appears that was exactly what happened to a Pennsylvania couple—owners of a Quiznos franchise. They were terminated after a secret shopper purchased a Prime Rib Philly Cheesesteak sandwich at their Quiznos store.

In 2006, as part of a national advertising campaign being planned by Quiznos in which Quiznos planned to claim its sandwich contained twice as much meat as Subway’s comparable sandwich, Quiznos sent out secret shoppers to several of its franchisee locations to purchase Quiznos’ Prime Rib Philly Cheesesteak sandwiches. The purpose was to make sure each sandwich contained at least 4.5 ounces of meat. A secret shopper at the Pennsylvania franchisee’s store purchased a sandwich that purportedly only had 4 ounces of meat. Quiznos sent out a letter terminating the franchisee. Although Quiznos claimed their plan was to allow the franchisee to cure the default, Quiznos sued the franchisee only two days after sending them the termination letter. In January, the franchisee won their case for wrongful termination, being awarded $349,797.00, plus fees, court costs, and post judgment interest.

It can be intimidating for a single franchisee to contemplate going to court with their franchisor, especially if the franchisor is large, but franchisees need to remember, the courts are not looking at the size of the litigate they are looking at the strength of the litigant’s case. If a franchisor has terminated a franchisee in violation of the terms of the franchise agreement, then a single franchisee should not be afraid just because of their size to do what is necessary to protect their investment.

Businesses know it is important to protect their trademarks from infringement. If they do not protect their marks, they could lose their exclusive right to use the marks. Some businesses are more aggressive than others in protecting their marks. McDonald's aggressively protects their trademarks. They have filed several lawsuits over the years, attempting to protect the “Mc” term in restaurant and food product use. The key factors in trademark infringement cases are whether the use of a similar mark will cause consumer confusion as to the source of the goods or services or is deceptive in some way.

In the latest installment of the “Mc” lawsuits, a Singapore restaurant franchise has finally won a trademark infringement case brought against it by the international franchise giant McDonald’s. The lawsuit started in 2001, when McDonald’s sued Malaysian Chicken Curry, which advertises itself as McCurry, for trademark infringement for the use of the term “Mc”. McDonald’s claims exclusive right of the “Mc” term in restaurant and food product advertising. The Malaysian Chicken Curry restaurant started in 1999 and serves Malaysian style cuisine. The restaurant is named after one of its popular dishes, Malaysian Chicken Curry. McCurry lost the case at the trial level, but after appeals, the court ruled in favor of McCurry.

While McCurry must be happy with their result, this finding will have dramatic effects on the strength of McDonalds' "Mc" designation in Malaysia. Will there be a snowball effect if other countries follow in the High Court of Malaysia's footsteps? Do you think the American court system would have come to a conclusion different from its Malaysian counterpart? Do you think sometimes businesses go too far in trying to protect their trademarks? There are so many possibilities--let's discuss!

Dispute resolution is an important term in a franchise agreement. Franchise agreements can have forum selection clauses, arbitration clauses, and choice of law clauses, among other dispute resolution options. When Congress passed the Federal Arbitration Act, it brought the use of arbitration onto equal footing as other dispute resolutions options and the traditional venue of the courts. Not long thereafter, arbitration came to national prominence and became a popular option for franchisors to use in their franchise agreements.

Current research has shown that over the last ten years, the number of arbitration clauses in franchise agreements has remained relatively stable (in a little less than half of the franchise agreements). Today, some groups want to eliminate required arbitration clauses in franchise agreements. Currently, there is a bill in Congress: the Arbitration Fairness Act. One provision of the Arbitration Fairness Act would make mandatory arbitration clauses illegal in franchise agreements. This act is opposed by the International Franchise Association. Some franchisors, however, are moving away from arbitration clauses by their own choice; for example, General Nutrition Centers Inc. has quit using arbitration clauses in their franchise agreements.

If you are a franchisor, whether or not to use an arbitration clause is a matter of weighing a number of factors. Sometimes a choice of forum and choice of law provision may be the better option. These decisions are best made with the assistance of a franchise attorney. If you are a franchisee, have an attorney review the franchise agreement before you sign the agreement or renew your franchise agreement.

To succeed, a franchise must identify a need in the marketplace, and fill that need. Particularly in today’s economy, finding a niche can mean the difference between downsizing, maintaining, or growing your business.

Franchises that find that niche can be successful even in otherwise languishing industries. Here is sampling of a few franchises that have found their niche:

1) The dry cleaning business has been around for decades without seeing any franchises experiencing significant growth. However, Certified Resotration Dry Cleaning Network has found its niche by focusing on dry cleaning clothing and household items damaged by smoke for insurance companies.

2) Rescuecom’s niche is providing onsite emergency computer repair 24 hours a day 7 days a week.

3) Finally, many fitness centers are now transitioning away from the do-it-all exercise and work out centers to smaller specialized fitness centers targeting specific clientele such as women or men only or specific workouts like aerobics or weightlifting.

The great thing about finding a niche is that it does not cost money; it just takes a little instinct and a lot of thought. If your business is struggling in these hard times, see if there is a niche you have been missing that could open the doors to some additional revenue.

As I’ve been watching the changes in the in-home movie rental business and the continuing decline of the Blockbuster chain, I began to think about how critical it is for franchisors and potential franchisees to try to imagine what their particular field of business is going to look like in ten years. Franchising provides a great opportunity to own a business without having to invest a lot of money, but beware! Purchasing almost any franchise is still an investment and most franchise agreements are binding for at least ten years. The last thing you want is to invest in a franchise, only to have that industry becoming obsolete in a few years.

To use home the in-home movie rental business as an example, look at the changes that have occurred over the last ten years—VHS and VCR movies have become antiquated. DVRs (digital video recorders) like Tivo record several hours' worth of television, in HD, and allow rewinding or slow motion replay of live programming. And at my whim, I can order a recently released movie On Demand, for little or no cost.

Technology's evolution is not the only change that has occurred in the in-home movie rental business. As our society gets even faster paced, people have become much more conscious about saving time, and have become master multi-taskers. People want to eliminate excess trips to the store; if they can make one trip to buy their groceries, prescriptions, and movies, they are going to do it. Thus, we have seen a steady decline in Blockbuster franchises and an explosive growth in Netflix and Redbox kiosks.

So how would you evaluate the success or decline of a franchise? First, do some research and consult with a business expert to help you carefully consider how changes in technology or society might affect your industry of interest in both the short- and long-term. I team up with the franchise experts, Alpha Growth Strategies, and encourage my clients to consult with them. Second, bring a franchise attorney a copy of the business' Franchise Disclosure Document. The attorney can explain what your rights and obligations will be for the term of your Franchise Agreement.

Amidst a slew of franchise disputes between deposed dealers and General Motors and Chrysler, Ron Bloom, head of the automotive task force for President Obama, addressed Congress and advised that the reinstatement of terminated franchise agreements could jeopardize the car companies’ return to profitability.

As discussed in a previous post, GM is planning to shut down over 2,000 of its dealerships and Chrysler is looking at eliminating 789 of its own. However, a bill was recently approved by the House of Representatives to undo those cutbacks. Some dealers are even resorting to franchise suits in state courts to prevent forced closings. Mr. Bloom indicated that the reductions are critical to streamline the operations of the two troubled automakers.

Sadly, I think that the dealership closings may be necessary at this stage, but the blame lies squarely on the shoulders of GM and Chrysler for allowing their networks to become bloated and saturating markets with dealers as opposed to employing the controlled outlet strategy of import car manufacturers. It’s a shame that hard-working business owners are having their stores taken from them through no fault of their own. Their collective mistake was betting on the wrong horse!

More than ever, American franchises are contemplating foreign expansion as possibilities in the United States remain stagnant. The two most populous nations in the world, China and India, are key areas for growth and feature rapidly-flourishing intermediate consumer bases.

McDonald’s has long been exemplary in terms of its global franchise model. In 2009, McDonald’s opened just 53 new restaurants in the U.S., whereas internationally, it opened 286 new locations. This isn’t simply an aberration, but has been the trend for the last couple of years. Meanwhile, McDonald’s global sales have jumped 7.2%!

The reluctance of U.S. lenders to issue loans has hurt American franchising, but abroad, third-party investors are frequently willing to back projects financially. This becomes a mutually advantageous relationship as foreign investors reap the benefits of well-established, clearly defined American brands. People instantly recognize those double arches! In light of such symbiosis, international markets are ripe for development and can support sustainable growth.

How can your business grow in these challenging economic times? Want more tips and strategies? I do too. That's why I count on my business and franchising experts, Alpha Growth Strategies. I work closely with them to give my clients the edge in business development.

Reading through the news today it seems restaurant franchises are willing to do just about anything right now to get customers in the doors. The major hamburger franchises have always offered toys and collectable glasses to purchasers of certain meals. Additionally, some of the larger franchises conduct games annually, or almost annually, where customers can win high dollar prizes, including cash—think McDonald’s® Monopoly® game. Kentucky Fried Chicken just unveiled a new sandwich with no bun! Yes, I said no bun. Other Franchises such as Tropical Smoothie Cafés and CiCi’s Pizza are offering customers the chance to win VIP trips to Hollywood studios and Pizza parties where families can get coupon books.

Not every business has the financial resources like McDonalds® or other larger franchises. So what does a smaller franchise or business with more limited resources do to get the customers to their stores? I think one thing franchises can do is focus on their core customers. Offer a specific gimmick that would appeal to this unique group. Another strategy is joint advertising promotions. This means teaming up with a complementary business, and develop a promotion to benefit both businesses.

What kind of approaches are you using to maintain and grow your business or franchise in our current economic times? Are they working? Please, feel free to share.

Gap Inc. has inked a new franchise agreement that will yield new Gap stores in Thailand. Armin Systems Limited, a retailer in Thailand, has been designated as licensee and will open the first Gap location in Bangkok in the spring of 2010.

The Gap is the biggest independent retailer and includes the Banana Republic, Old Navy, Piperlime, and Athleta brands. Along with its partners, the Gap has opened 100 Gap franchise stores plus 34 Banana Republic franchise stores in 17 countries. Across North America, Europe, and Japan, the Gap has over 3,100 locations.

Despite this already sizable network, the company is looking to emerging regions to help buoy sales as the recession has curbed spending in the United States. The Gap clearly understands the importance of spreading internationally and getting its name out to more and more areas.

On the other hand, oversaturation of markets also can be a concern so it is crucial for companies to tactically place their locations to provide the widest consumer access possible without any overlap. Remember when you couldn’t walk one block without seeing three Starbucks? It was forced to scale back because it had flooded cities with shops! It’s definitely a fine tuning act to open new stores without creating too much supply and is one that shouldn’t be done without proper advice.

Want to strategically expand your business? A methodical franchise attorney can help you increase your branches the right way!

In the wake of the worst American recession since the Great Depression, plummeting vehicle sales, and impending Chapter 11 bankruptcy, embattled automaker General Motors has announced that it will end franchise agreements with 1,270 dealerships across the country next year. Of its eight current nameplates, Pontiac will be eliminated, and Saturn, Saab, and Hummer all have been sold off.

GM stretched itself too thin and saddled itself with an inflated number of uncompetitive brands. The irony of the situation is that GM is finally showing flashes of potential and is producing desirable cars (e.g. the ZR1, CTS, and upcoming LaCrosse) after years of badge engineering, bean counting, and allowing that cut-corner mindset to adversely affect the quality of its cars.

The damage is likely to get much worse: GM is seeking to slash the number of dealerships by a total of approximately 2,400 by the end of 2010. GM failed to strategically align itself globally, made poor agreements with the United Auto Workers, and neglected to value engineering and the quality of its products above all else. GM made its own bed and has to sleep in it. Regrettably, now thousands of dealers may have to pay the price for GM’s ineptitude.

Although GM launched an pathos-packed campaign (including a television commercial!) to re-new its tarnished image and gain America's support, how would you feel if you were abruptly dropped after a franchise agreement you had worked hard to negotiate and uphold? I would be livid if I lost my business due to the mismanagement and incompetence of my franchisor!

How do GM’s actions strike you? Is it fair to the franchisees? Contact me to discuss!

A highly effective way to expand your business is franchising, but what makes some franchisors more successful than others? The following tips may guide your decision-making process as you grow your company through franchising.

It is important to work with a reputable and experienced franchise development company. Even as a franchise attorney, I turn to my business development experts at Alpha Growth Strategies to review and advise as to the best way to make business take off. Select a company that is willing to assist you throughout the franchising process, including negotiating leases and making financial projections, and not just with producing contracts and the Franchise Disclosure Document.

Also, don't be frugal when it comes to your initial investments in a franchise operation. Typically, franchisors who enjoy success are those who invest in state of the art computer and IT systems. Communication and information is the foundation of any business venture. Additionally, select a location for the franchise headquarters that includes room to expand and that will deliver a positive first impression to prospective franchisees. These may seem like unreasonable expenses at first, but the extra investment will pay off with a higher rate of franchise purchases in the future.

Finally, hire a good public relations firm with experience in the field of your business. Such an outside source of expertise will help generate ideas to distinguish your company from others in the market place.

Numerous reports have surfaced alleging that the underlying ideas for one of the wildly successful Harry Potter books may not have come from author J.K. Rowling but instead may have been an imitation of a preexisting fictional personality dubbed Willy the Wizard.

Rowling’s 2000 fantasy novel, Harry Potter and the Goblet of Fire, is contended to have a striking resemblance to a book written by British author Adrian Jacobs in 1987 titled “The Adventures of Willy the Wizard – No 1 Livid Land.” Interestingly, it is claimed that Jacobs, who died several years ago, had unsuccessfully submitted the manuscript for his novel to the same literary agent that currently represents Rowling. Jacobs' estate has commenced a copyright infringement action against Rowling’s publishing company, Bloomsbury Publishing Plc.

Copyrights enable authors, artists, musicians, and other composers to guard their intellectual property and deter plagiarism. In the absence of a license agreement or other authorization, the original author has exclusive rights to reproduce or create derivatives of his or her work.

I, for one, hope that the accusations are unmeritorious as Rowling has been an inspiration to many and substantiation of such claims would cast a dark cloud over a series that has entertained millions. Duplicating another’s original literary work and passing it off as one’s own is tantamount to theft and would be extremely distasteful, especially for a multi-billion dollar franchise such as that of Harry Potter.

What’s your reaction to these allegations? Please post your thoughts and comments!

Once you have developed a business plan and established a franchise, it is important to stay connected with your franchisees. Your success, in the form of license and franchise fees as well as profit sharing, may depend largely on their success. Therefore it is vital that you are able to be their guide. Consultants in the field of franchising have identified various ways to deliver messages to business contacts.

The use of newsletters is one of the more traditional methods of sharing information. For example a franchisor may send franchisees a monthly newsletter to discuss brand ideas as well new marketing insight. In addition, an innovative franchisor will solicit feedback and advice from franchisees about their particular operation. This will provide material for future newsletters. In this manner, each franchisee may benefit from the collective knowledge of the whole group. Another way to disseminate information is through videos. This is especially useful in situations where language barriers are present, such as international restaurant franchises.

Of all the communication methods available, intranets are the most revolutionary because they can relay information in an instant. An intranet is a private computer network that transmits secured information between users. This is different from the Internet, where the public has general accessibility to data. Franchises using intranets benefit from message boards or chat boards where franchisees can post messages or get quick advice from each other. Therefore franchisees save time and money as they are able to get help with problems almost as they arise.

For various reasons, a franchisee may want to get out of a particular business and sell the franchise. But is this permitted? Can a franchisee sell a franchise or is this something only franchisors can do?

In general, the answer is yes, however some conditions may apply depending on the Franchise Disclosure Document (FDD). In addition to governing operational issues such as royalty fees, the FDD often contains provisions regarding franchise resell. For example, the original franchisor usually reserves the right to approve new buyers. This provision protects the franchisor as well as other current franchisees by preventing under-qualified individuals from becoming business owners and besmirching the business reputation and consumer good will. On the other hand, the franchisor’s right to approve the new buyer might serve as a detriment by hindering the franchisee’s ability to sell the business.

If you are considering purchasing a franchise, examine the FDD to fully understand the terms of the franchise agreement. Particularly, look for provisions that might affect franchise resell if you are unsure of long you want to own the business. It is important to identify undesirable aspects of the FDD because a franchisor may be willing to negotiate. In any event, it is not advisable to enter any purchase agreements without first consulting a franchise attorney.

Like other entrepreneurial individuals, you may have thought about purchasing a franchise but do not know where to start. Though we use goods and services provided by franchises on a daily basis, information about buying the actual business does not always appear to be so readily accessible. In reality though, the information is easy find if you know what you are looking for.

Before looking at any specific franchises, determine what type of business most appeals to you. For example, if you have enjoyed working in food service over the past years, you might prefer a restaurant franchise or other similar food service oriented business. On the other hand, it is not advisable to purchase a franchise related to past negative work experiences.

Then, assess whether that type of business is economically feasible in your geographic area. Just because you like a business idea does not necessarily mean customers will. Accomplish this by examining other franchises in the area that have endured throughout the years. I usually refer my clients to a franchise development consultant, like Alpha Growth Strategies, to assist in evaluating potential sites.

After determining what type of business will fit both you and the area, your search for franchise opportunities will be more focused. Find information about specific business at the Franchise Registry. The Franchise Registry lists businesses that are approved by the Small Business Association as being fair.

Don't go about evaluating franchise opportunities alone! For more advice regarding franchise opportunities or purchasing a franchise, contact a franchise attorney to schedule a consultation, and be sure a franchise development consultant participates in the meeting.

Despite a poor economy, a weak job market, and an increasing number of layoffs, now is a great time to buy a franchise. The number of franchises in the industry has increased and created competition among franchisors, which are becoming more aggressive in recruiting franchisees.

Some franchisors have resorted to attracting buyers with discounts on initial fees and costs. For example, one company announced that it would waive a $30,000 franchise fee for qualified military veterans.

Other franchisors have developed creative tactics to target nontraditional franchisees. One such tactic is to offer employee discounts. This plan encourages employees to purchase a franchise by rewarding high performers with a discount on the initial franchise price. The resulting franchises are often highly successful because the franchisee is better-trained and less likely to make costly mistakes.

Franchisors are also offering money-back guarantees to reduce the uncertainty associated with buying a business. A typical guarantee provides that if the business has not reached certain revenue goals after the first year, the franchisor will buy the franchise back. In most cases, the guarantee is only valid if the franchisee follows franchise guidelines in operating the business.

It is a buyer’s market when it comes to franchises. In light of this competition, be aware that many franchisors are willing to negotiate fees and payments structures. If you have thought about purchasing a franchise, consult a franchise attorney for advice and assistance with the acquisition.

If you have a successful business, you may want to consider expanding through franchising. By franchising, you can grow larger and faster because the franchisees provide the funds for the growth, not you.

One important issue to consider before franchising is whether you have developed a strong trademark for your business. This is crucial because a strong trademark delivers a consistent message to consumers about your franchise’s products and services. Franchisees will pay higher royalties for a franchise like Subway, which has a nationally reputed trademark, than they will for a franchise with little or no consumer recognition.

In the very least, be sure to register your trademark before franchising. Registration provides a presumption that your trademark is valid. This will facilitate any claim of infringement in the unfortunate event that one of your franchisees attempts to improperly license or use your trademark.

A strong trademark is a term or phrase that does not merely describe the goods or services. Rather, strong trademarks require imagination, thought, or perceptions to link the mark with the provider of the goods or services. Such marks may suggest the quality of the goods or services, or may not have anything at all to do with the goods or services. For example, Greyhound might imply that a bus line provides fast transportation. Apple, on the other hand, may have nothing to do with a line of computers.

Franchises are built upon sound business models. However, buying into a franchise does not always guarantee success. As a potential business owner, financial success depends on whether or not you are diligent and avoid some of the common mistakes new franchisees often make.

Commonly, a franchisee proceeds to purchase a franchise without fully understanding the terms in the franchise disclosure document (FDD), the document outlining the franchisee's and the franchisor's responsibilities. This results in later misunderstandings between the parties, such as conflicts in fee scheduling and grand opening dates. If you are thinking about buying a franchise, a good idea is to create a list of questions that arise when you review the disclosure documents. Go over this list with your attorney at a later time. Also, present the list to the franchisor for written clarification to your questions.

Another mistake is failure to contact enough current franchisees. By speaking with other franchise owners, you will be in a better negotiating position because you can compare the offer the franchisor made you with offers made to other franchisees. Contact current franchisees other than those referred by the franchisor. In this manner, you will come to understand both positive and negative aspects of the franchise.

Similarly, franchisees also do not investigate failures within the particular franchise. When contacting other owners, find out what has and has not worked for that business. This will help avoid costly mistakes and may even save your franchise in the future.

Avoid these mistakes by contacting an experienced franchise attorney to set up a consultation.

Wood, Atter & Wolf will be hosting an exhibit at the 2009 Business & Career Expo, hosted by the Jacksonville Regional Chamber of Commerce. It will be on Wednesday, May 27, 2009, from 1-7pm, at the Prime Osborn Convention Center. Admission is FREE to the public!

We will be showcasing Trademark and Franchise law with Alpha Growth Strategies, who are experts in business development and franchising. Together, we will feature legal and business consultations regarding trademark registration, licensing, and business/franchise evaluations.

As always, we will also have attorneys available to ask questions about our other areas of practice, including Personal Injury, Wrongful Death, Criminal Law, and Family Law.

Last year, the Expo featured 250 exhibits, and attracted over 1500 people. For more information, contact us.

Veteran franchise owners advise initial start-up costs can become excessive if you are impatient. In other words, rushing to open your business almost always costs more in the long run. The following tips provide ways to reduce franchise start-up expenses by deliberate decision making.

Negotiate fees. While fees are generally the same so that all franchisees are treated equally, contact existing franchisees to see what their fees were. If there is a deviation, even slightly, find out the reason for the lowered fee, and see if you can qualify for the same discounted rate. This will put you in a better position to negotiate with the franchisor.

Package Deals. Some franchisors offer a package franchise, also known as a turnkey package. In these arrangements everything needed to begin operating the business is included for one price. For example, the franchisor or a third party may supply the inventory, the physical store, and all the equipment for operating the business. Turnkey packages benefit franchisees by saving time because franchisee does not have to acquire and organize the resources on their own. On the other hand, turnkey packages are more expensive because the added convenience adds to the price as well.

Shop For Equipment: When starting a franchise, many business owners fail to shop around for equipment. It is a good idea to get as many prices for equipment as possible in order to determine a reasonable price range. Also, by obtaining bids from multiple sources, you can negotiate with your selected supplier for even more savings.

Used Equipment and Fixtures: Purchasing used equipment for your business can translate into substantial savings. Just make sure the items meet your franchise guidelines. For example, buying used commercial kitchen appliances for a restaurant or used display shelves and fixtures for a retail store and greatly reduce the initial cost of operating.

Facing the reality of being laid off by your company, you may have considered the prospect of owning your own business. While there are various entrepreneurial avenues to financial independence, many people are turning towards becoming franchisees. But what businesses are available for purchase?

Many franchise websites offer lists of available franchises. In particular, you can narrow your search by industry type, stay-at-home solutions, or environmentally sound “Green” franchises such as cleaning services, which employ eco-friendly detergents that do not contain CFCs.

Many franchises offer a proven business model as well as a widely recognized brand. With the necessary capital and initiative, you can soon be at the helm of your own business.

Such online lists of franchises are a good starting point to determine what type of franchise you intend to procure. But instead of entering into any agreements online, you can avoid potential scams by contacting an experienced franchise consultant, and consulting with a franchise attorney.

Many people consider purchasing a franchise, but what about the other end of the franchising industry: expanding their own business and becoming a franchisor? Not all businesses translate into good franchises, however. So how can you determine whether your business will succeed as a franchise?

Good franchises share a few common elements. First, your business plan should include goals and objectives in order to identify your client profile. As the franchisor, keep in mind that your client is not the end consumer, but rather the individual purchasing your franchise. To advertise more effectively, determine the precise client demographic your franchise would most likely attract.

A business plan should be easy to replicate. One way to accomplish this is to have a plan featuring specific details, right down to daily operations and training. Franchisees are often people who want to run a business, but wish to forgo the trial and error inherent in building a business from scratch. Therefore, your product should meet their needs in providing a business ready for operation without undue experimentation.

Finally, determine how many stores a geographical region can support. Do not make the mistake of allowing too many franchises operate within a close proximity to each other. This inevitably results in competition among your franchisees.

If you’re thinking of acquiring a franchise, it is a good idea to first investigate the company. Although there is no uniform database that will inform you whether a company is operating legally or in good faith, there are a few leads to utilize in your investigation.

Find out if the company has registered with the Better Business Bureau or if anyone has filed a complaint against the company. You can discover if any complaints have been filed by contacting the Federal Trade Commission. Simply send a written request for information to the following address. Include in the letter the name of the company of interest as well as your name and address. Often, this is a free service to the public. The address: Freedom of Information Act Request, Federal Trade Commission, Washington, D.C. 20580.

Also, you can check out the applicable state agency for registering business opportunities. In Florida, franchisors are required to file with the Florida Department of Agriculture and Consumer Affairs, Division of Consumer Services.

Another fact to consider is whether the company has changed its name in the past. Businesses that alter their name and change their address of operation may have something to hide or wish to avoid accountability. Furthermore, it is a good idea to obtain the contact information of 10 prior franchise purchasers. Get in touch with them to find out how this franchise has dealt with others in the past. Also, make sure these references are legit and not just paid by the franchisor to give a good review. Finally, another good idea is to find out the number of other franchisees in your geographic area. It may not be a good idea to enter a saturated market.

Above all, when deciding whether or not to purchase a franchise, you can never be too careful. Not only should you consult with a franchise attorney to cover the legal requirements, but you should also consult with a franchise consultant. I recommend Alpha Growth Strategies, whose expertise can benefit any franchise across the country. They can be contacted at 417 Cheryl Court, Jacksonville, FL 32259.

Gordon Ramsay, the notoriously razor-tongued head chef on Fox's reality show, "Hell's Kitchen," is hosting another show called "Kitchen Nightmares." "Kitchen Nightmares'" premise is much broader than that of its predecessor, because Chef Ramsay not only critiques the menu items, but also the way the business is operated. Each episode focuses on a quaint Mom & Pop restaurant in desperate need of an overhaul. Think of a marriage between "Trading Spaces" and "Nanny 911."

Chef Ramsay addresses problems by sampling the menu, rummaging through the inventory, observing the work habits of the owners, managers, and chefs, and considering the decor in the establishment. As expected, he will eat "the worst meal" he has ever had. Surprisingly, however, he will find moldy cherry tomatoes in the same container as fresh ones, or cooked chicken stored with its raw counterparts. And typically, Chef Ramsay will identify communication problems among those running the restaurant, as well as ambition or respect issues within those individuals.

Chef Ramsay's remedies often include simplifying the menu. In one episode, he made the ingredients easier to obtain by choosing supplies from local farmers. His remedy also includes defining and delegating very specific responsibilities to each owner or manager. And finally, he gives the restaurant a face-lift. It's worthy to note that he doesn't do any renovating, and he often leaves the fixtures as they are, but his creativity totally transforms the dining room atmosphere. In an episode with a waterfront seafood-themed restaurant, he added miniature fish bowls at each table, and gave diners a piece of rope with a guide to tying nautical knots while waiting for their food. The "little" things and a coat of fresh paint often made for an astounding presentation.

In essence, Chef Ramsay made these restaurants franchisable. By offering fresh, simple, yet gourmet menu items, and serving in an aesthetically pleasing dining room, he made the products and the service UNIQUE. By delegating management responsibility, streamlining food preparation, and implementing hygenic procedures for food storage, he made the business method SIMPLE. And finally, of course there are always panning views of the customer line out the door, to show that this is a FINANCIALLY SUCCESSFUL operation.

Are you a business owner? Would you like a Chef Ramsay-style consultation (minus the curt insults) of your operation to determine whether it is franchisable, or find out what you can do get it to that stage? Is your business at the stage to prepare it for franchising? Arrange a consultation with me.

Labels: business, business growth, franchise, franchising

The Federal Trade Commission (FTC) defines a commercial relationship to be a franchise when:

(1) the franchisee is permitted to use the franchisor’s trademarks;

(2) the franchisor has the ongoing right to control significant aspects of the franchisee's operation; and

(3) as a condition to continue this relationship, the franchisee pays the franchisor.

When a business relationship falls under this franchise relationship, the FTC requires that the franchisor discloses specific information to the franchisee. The items to be disclosed are outlined in 16 CFR 436.

Labels: franchise, Franchise Disclosure Documents, franchising, royalty

On the other hand, you may be trying to start up a business, but be tired of re-inventing the wheel. You want to own your own business, but don't know what policies and procedures to implement. You wonder, "Isn't there an easier way to improve my chances of success?"

Franchising can sometimes be the fitting solution. A franchise is a relationship between a franchisor and a franchisee. Franchisors are those who seek to expand their reach beyond a local or regionalized market. Franchisees are the ones who get access to an established brand, a proven business model, and marketing and supply support. In exchange, the franchisor collects a front-end fee, ongoing royalties, and the ability to increase brand recognition and market share on a larger scale.

Entering into this relationship, either as a franchisor or franchisee, has many legal implications. The documentation, including the franchise agreement and the disclosure documents (regulated by the Federal Trade Commision). Whether starting a franchise or buying into one, talk to a franchise attorney about these important documents.

Labels: business growth, franchise, franchising, royalty