Understanding Franchise Rights When It Comes to National Business Accounts
As service and product based franchise systems (such as home repair‚ computer support and ink suppliers) develop and expand their franchise base across the nation‚ issues arises as to a franchisors procurement of "national accounts" and how the terms of any agreed upon "national contract" will affect the revenues and profitability of franchisees.
In a recent article on this topic‚ "Franchisees Balk at Handyman Plan"‚ Wall Street Journal columnist Richard Gibson discusses Mr. Handyman International‚ LLC's negotiation and introduction of a national service account contract with Wyndham Hotel Group. Mr. Handyman International‚ LLC‚ as franchisor‚ is negotiating and implementing a contract providing for repair services to be provided by its franchisees to certain hotel properties of Wyndham Hotel Group.
For franchisees the introduction of a national accounts may represent added revenue and profit opportunities. However‚ the "devil is in the details" and the terms of any "national contract" must be closely examined by franchisees. Some important factors for franchisees to consider‚ include:
- Does the existing franchise agreement "carve out" national accounts from the franchisees "protected territory";
- How will national accounts located within a particular franchisees territory be services;
- Does the "national account contract" fix fees and are the agreed upon fees profitable for franchisees;
- Does the franchisor require a higher royalty on fees generated from "national accounts";
- Will franchisees be required to "bid" on servicing national accounts;
- What fees will the franchisor charge for managing national accounts.
For individuals considering the purchase of a franchise consider and discuss with you franchise lawyer the scope of your protected territory‚ whether or not national accounts are excluded from your territory and any protections that you could implement into your franchise agreement respecting a franchisors future development of a national account.