In “A Franchise Consultant’s Legal Nightmare,” Janet Sparks at Blue MauMau discusses some of the legal issues that Christopher Conner and Franchise Marketing Systems may be facing regarding some of the franchise brands they represent. As I stated in my comment to Janet’s article, while I am not familiar with Christopher Conner or Franchise Marketing Systems and while I have absolutely no knowledge as to whether or not Franchise Marketing Systems did or did not do something wrong, Janet’s article is extremely instructive for start-up and emerging franchisors. The most instructive point is how and why does RedRhino (the franchisor mentioned in Janet’s article) find itself involved with any legal issues when by all accounts the company seems to be run by entrepreneurs with a solid product, service and offering?
Well…first thing to understand is that there are two sides to every story and this article is not about attributing any wrong or negative actions to Franchise Marketing Systems or anyone else. However, if you are a start-up franchisor or emerging franchisor there are key learning points to discuss from Janet’s article.
So lets get started…here are the basics that you need to know…
- When it Comes to Franchise Violations It Doesn’t Matter if You Are Right or Wrong. Look things happen but as an emerging franchisor your goal is to successfully launch and expand your franchise system. Launching with the right franchise platform and with the right guidance is critical to avoiding and mitigating regulatory risk. Which gets to my point that even if you think you are right or did nothing wrong or did everything an advisor told you…if you get hit with a franchise violation then it is you and your emerging franchise system that will be harmed. So, you need to get it right and understand that there are no short cuts…licensing is not a replacement to franchising and franchise advisors are not replacements to franchise lawyers…
- Selecting the Franchise Team: Franchise Consultants and Franchise Lawyers. When franchising your business and guiding your emerging franchise system through the franchise sales, registration and regulatory process you must rely on a dependable team of franchise professionals that include a franchise lawyer committed to you and your system. Franchising is not an easy nor inexpensive process and if someone tells you otherwise then you need to walk away. Franchise consultants are not franchise lawyers and far too often franchise consultants attempt to bundle legal services into their own “consulting services”. Am I saying this because I am a franchise lawyer “…trying to protect my turf” – No, absolutely not. I am also an emerging franchisor and I am saying this because it is true, because it happens far too often and because it is harmful to start-up and emerging franchisors. If you are reading this article and think I am wrong, I would be glad to hear from you. Also I recommend the following article “Franchise Consultants verses Franchise Lawyers”.
- Licensing is not a Short Cut to Franchising. If you don’t have a FDD and you are not registered in a particular state then don’t sell a franchise in that state. If you find you advisors telling you about alternatives to franchising like “licensing” or the fact that you could have your prospect sign a “management agreement” as opposed to a franchise agreement…proceed with caution. Chances are you are violating state franchise laws.
Why does this all matter? This all matters because your business matters, your goals matter and your dream of expanding your business and brand matters. Sure no one likes dealing with regulation or legal issues but they exist and as an entrepreneur you need to put the right team in place to accelerate and grow your franchise system.
Licensing vs. Franchising