So often franchisors look for faster ways to expand their systems and extend their brand name. One of the common ways to do this for franchisors is to sell regional franchising rights or master franchising. This is where the franchiser allows for sub-franchisors to do the franchising in a specific region or with a certain sector using the franchisor’s brand name, products and services.
We looked at this in our franchising company and came back under whelmed by the initial results after rolling out two major master franchise areas one in the Northern Midwest and another in Arizona and New Mexico. We found our selves with less control over our brand name and use of the marks than we had hoped for and unable in many cases to enforce our master franchise agreements due to various inconsistencies in state laws. The United States of America is a sham when it comes to consistency of law and the court system and acts more like the United Countries. It is for the most part a complete lie to the business community to call it the United States, which is too bad really.
We decided instead to make our star franchisees who were interested Regional Team Managers and sign agreements which were only 2-years in duration, thus if performance was not so hot, we would not lose out long-term with under developed areas. Here is the basic two-year concept I came up with below;
Regional Team Manager Exclusive Territory:
Regional team manager agrees to pay Franchisor for the rights to be assigned as a regional team manager in their exclusive territory. This fee is due and payable upon the signing of this Agreement in the amount of __________________ dollars or if the Franchisor consents due and payable at the rate of _______________ dollars per new franchisee for the next __________ franchisees in their exclusive territory. Franchisor agrees not to compete with the regional team manager in the regional team manager’s exclusive territory while this Agreement is in force. Regional team manager agrees to place _____________ franchises in the regional team manager’s exclusive territory within twenty-four (24) months of opening the exclusive territory. If the regional team manager does not meet the required number of placements in the first twenty-four (24) months, Franchisor will, at a reasonable cost to the regional team manager, come into the exclusive territory and help the regional team manager sign up new franchisees.
It seemed to work okay and we did in fact have two under performers using this method one in Pennsylvania, which only added one franchisee and another Regional Team Manager in Colorado, who did not provide the needed services to the franchisees in Fort Collins CO, or Colorado Springs, CO. and luckily for us by that time the 2-year agreements were coming up for renewal and we simply did not exercise that right and thus there was no disruptions or legal issues for us.
If you own a franchising company this might be something to think on and something to ask your franchise attorney about, as every business is a little different and the laws change faster than most people change their tires. Consider this in 2006.
"Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; http://www.WorldThinkTank.net/wttbbs/
