3 Reasons Why Your Franchise Lawyer May be Costing You Deals
For some franchise brands, the legal process can be frustrating. You spend tons of money, time, planning, and effort to attract, recruit, and onboard new franchisees. And along the way, come legal obstacles. These obstacles come in different forms and varieties. What they all share in common, is that they cost deals, add unnecessary frustration, and, so much more often than not, are avoidable. They’re also a sign that you’re not getting the legal support that you need and deserve.
Why does this happen? Well, you may not be working with the right legal partner for your brand, and below, we list 3 reasons why your legal team may be costing you deals:
1. Your FDD Does Not Meet Best Practices
The Franchise Disclosure Document is, unavoidably, a part of the franchise sales process and needs to be competitively positioned. No matter how great your franchisee attraction, education, discovery, and sales processes are, your FDD plays a role that is front and center to your entire recruitment process.
This is even more the case when dealing with franchise brokers and broker organizations that scrutinize FDDs who are looking for the right relationship and fit for themselves and their franchisee candidates.
If your FDD doesn’t reflect best practices, it’s costing you deals. Not only the deals that seem to fall off track last minute and don’t close but, also, lost deals that either never gain traction or never get to your door. Consider some of the following best practices strategies that you cannot afford to miss out on:
An Industry Best Item 19
Just about every brand has an Item 19. But, most of them are missing the detail, data, and insights that are needed to supercharge franchise sales and attract brokers.
Transparency is critical. And, even if your data is average or on par to your competitors, there is so much opportunity to differentiate your brand within your Item 19. You know the questions that candidates are asking, so why not do a deep dive with your legal team to develop a great Item 19 framework? It should include detailed definitions, a clear narrative about company-owned and franchised outlets, data that goes beyond gross sales and, at a minimum, includes cost factors and gross profits or unit level metrics demonstrating average sales, pricing, year over year growth, and other data unique to your business.
Modeling out your Item 19 should involve a planning process that starts early–months before registration and renewal season–and not a last minute conversation in December or January.
Multi-Unit Strategies that Attract and Support Future Growth
Your FDD needs to get your multi-unit development offering right. We all know that brokers, for good reason, love to sell multi-unit / multi-development franchise opportunities. So, how well is your FDD structured?
If you are a brick and mortar retail based business or restaurant, do you have a competitively positioned and easy to understand multi-unit development opportunity?
If you are a service based business, does your FDD clearly offer multi-territory opportunities that make sense?
Getting your multi-unit development opportunity right is not just about sales. Your legal team should help you make sure that you have the right legal safeguards in place to avoid underperforming franchisees and under-serviced territories. This requires a smart assessment of territory requirements, performance requirements, and adaptable minimum royalty structures.
With your legal team, there should be an always-on process focused on streamlining your FDD. Where possible, your FDD should incorporate fairness provisions that balance out franchisee concerns and frustrations during the initial review process.
Whether it’s granting multiple renewal terms, reducing renewal fees, facilitating franchisee estate planning goals, and other fair and reasonable franchisee requests, there’s an opportunity to improve your FDD and differentiate your brand.
2. Your Registrations are Delayed and Your Sales Go Dark
Every franchise brand has experienced this at one time or another. And, many times, it may have nothing to do with your legal team. But, if FDD development and state registration delays are caused by your legal team and a poor update process, then you’re unnecessarily losing deals and hurting yourself.
For calendar year franchisors, your FDD updates, renewals, and planning should start in the summer and not later than September. Early on, your attorneys should be modeling out and communicating opportunities to improve your Item 19 and give you the time needed to collect and organize data.
Also, the planning process should involve accountant conversations to prepare audited financial statements, and stage FDD updates to be painless and ready to launch in the new year. Early planning, process, and communication is key. Waiting until November, December, or January is just a recipe for frustration, delays, and lost opportunity.
Then, once your FDD is submitted for registration and renewal, your legal team needs to place an absolute priority on immediately responding to comment letters and providing you with immediate updates and the ability to track the status of your registrations.
3. Attorney Communication, Access, and Turnaround Takes too Long
Many times, we hear from franchisors about how much they like their current attorney and franchise law firm, but that the communication and turn-around is killing deals.
We also hear about the frustration of having to go over information multiple times with different legal team members and personnel about agreements, addendum, or FDD updates to get out the door. In addition to endless attorney phone-tag, we also hear about the frustration of not having a legal team accessible when you need them.
Many times, these problems are caused either because your franchise lawyer and his or her firm is not a franchise only law firm or because they are not built around serving the needs of emerging franchise brands like yours. Your franchise growth priorities need to be their priorities. You need a legal team that’s always accessible, proactively plans FDD updates, registrations, and renewals, and that provides guaranteed turnaround of your agreements, addendums, and franchisee compliance needs.
How We Can Help
Learn more about our Franchise Counsel Program that’s designed to eliminate these problems. You’ll get 24 hour turnaround time for franchise agreements, addendums, and negotiations, no phone tag, priority responses to state comment letters, plus so much more. Give us a call and we will give you a free evaluation of your current FDD with tips on how we can help improve your FDD that may be killing deals.