So often in franchising folks think that the franchisor and the franchisees are intermingled financially and this simply is not so. Franchisors and franchisees have more of an independent contract type relationship than anything else. Why is this separation so important? Well for liability issues for one reason.

You see if the franchisee has an employment lawsuit, fails to make a profit, pay their bills on time to vendors or other legal issue of this type the franchisor must maintain a separation. In fact one of the definitions between independent contractors and franchising is that the franchisee maintains business risk. In our franchise company we wanted to be sure to distance ourselves from the potential legal liability that our franchisees might create and therefore I put this clause into all of our franchise agreements;

7.12 Relationship of the Parties

Franchisee is and will remain an independent contractor. Franchisee and Franchisor are not and will never be considered joint venturers, partners, employees, or agents one for the other. Neither will have the power to bind nor obligate the other except as otherwise outlined in this Agreement. No representation will be made by either party to anyone that would create any apparent agency, employment, or partnership. Each will hold the other safe and harmless from each other’s debts, acts, omissions, liabilities, and representations. Franchisee acknowledges that Franchisee is not in a fiduciary relationship with Franchisor.

In all public and private records, documents, relationships, and dealings, Franchisee will show that Franchisee is an independent owner of the Franchised Business. Franchisee will prominently indicate on its letterheads and business forms that Franchisee is a licensed Franchisee by using language saying that Franchisee operates an independently owned Franchise.

Franchisee will maintain employee records to show clearly that Franchisee and its employees are not employees of the Franchisor.

The liability of Franchisee’s shareholders, members or partners will be both joint and several. A breach of this Agreement by Franchisee or by any shareholder, member or partner will be a breach by all of the shareholders, members or partners and also by Franchisee.

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A franchisor must not only perfectly execute his strategy to extend brand name and market share thru its outlets, but it must also be careful to distance its self from unnecessary liability in a litigious industry. You of course will have to ask your own professional parasite [attorney] how your company will most likely deal with this. This is how we dealt with the problem. Consider all this in 2006.

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Franchising companies must address consistency of the products they use both in the operation of the franchise and those are items which they sell. The franchising company must address these issues in the original franchise agreements that each franchisee signs. If some franchisees by their paper napkins from one company and another franchisee trying to save money buys their paper napkins from another company to save money; there might be a problem with the quality from one of the companies that the napkins are bought from. This can cause customer complaints, quality control issues and presents a problem for all franchisees of the franchising system.

To prevent this from happening in my company I added a clause to our franchise agreements to address the issue of approved vendors, quality control issues and consistency. Below is a copy of that clause in our franchise agreements;

4.6 Non-Proprietary Equipment and Supplies

Franchisee will have the right to purchase equipment and supply items, other than Proprietary Products, for use in providing Services, from any responsible source; provided, however, that Franchisor reserves the right to approve suppliers, equipment and supply items. Independent suppliers will be approved by Franchisor if their products meet the reasonable quality standards established by Franchisor. In order to obtain approval of any such proposed alternative equipment or supply item, Franchisee will provide Franchisor with documentation from a source independent of Franchisee or the proposed supplier which demonstrates, to the reasonable satisfaction of Franchisor, that the proposed alternative equipment or supply item performs as well as the item to re replaced.

Nothwithstanding such documentation, Franchisor will have the right to test further any such proposed equipment or supply item and Franchisor will be reimbursed by Franchisee for the costs of testing such items. In addition, Franchisor reserves the right at any time to require substitution of newly developed Proprietary Products for non-proprietary items, which would then be sold to Franchisee in accordance with Section 4.6. The sale by Franchisor, if offered, of nonproprietary equipment and supplies to Franchisee shall include a commercially reasonable markup.

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Every franchise company is well advised to maintain a strong approved vendor list of quality products that will be used in the operation of the franchise. The franchise company needs to address this issue in the franchise agreements and seek expert legal advice from a franchise attorney who is a specialist with experience in the franchising field. I hope you will 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/

Every small business knows that you participate in the community, then the community will shop in your store. In a franchise business, the franchisor should also encourage, if not require a franchise outlet to do community service and stay involved with the community that will support them.

It is for this reason that in my company, we required as per the franchise agreement, as well as the confidential operations manual, that each franchisee perform fund-raising events for local charities. It may seem all odd that a franchise or would have required as of their franchises, but I don’t see it that way. I wanted to be known up front in prior to the commencement of the franchise operation that he franchisee is required and must help the community. Below is the clause I’ve put into each and every franchise agreement;

3.16.5 Community Events

Franchisee must perform twelve (12) car wash fundraisers, one for each month, for their local community(s) each year.

During rainy months in your Marketing Area and with our prior written approval Franchisee may substitute one community service project per quarter in lieu of three car wash fundraisers as outlined in the Confidential Operations Manual. All community events are to be performed no further than fifteen (15) miles from any border of their Marketing Area or within their Marketing Area.

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As your franchising company considered requiring community service and community involvement? If not, perhaps you will contact your franchising attorney and ask them if this makes sense for your franchising company. I hope you will 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/

Image is so vitally important to a franchising companies brand-name, that each and every franchisee must maintain consistency of appearance in their franchised outlets. This means that maintenance and repair of the business location must be up to standards of the confidential operations manual of the franchised business at all times.

If a franchised outlet is in the state of disrepair and looks it, but customers will know and it will be difficult for them to maintain consistency and quality in the goods and services they perform and provide. It is for this reason that every franchisor must pay specific attention to this detail. Below is a clause I put into all of our franchise agreements to address this issue;

3.18 Maintenance and Repair

3.18.1 Maintenance and Appearance of Business Location

Franchisee must maintain the condition and appearance of the Franchised Business in a manner consistent with The Car Wash Guys System image. Franchisee will perform all maintenance that is reasonably required from time to time to maintain the condition, appearance and efficient operation of the Franchised Business, including replacement of worn-out or obsolete fixtures, equipment, signs, supplies and inventory, repair of the interior and exterior of the premises and periodic cleaning and decorating. If at any time in the Franchisor’s reasonable judgement the general state of repair, appearance or cleanliness of the Franchised Business does not meet Franchisor’s standards, then Franchisor will give Franchisee written notice specifying the action to be taken by Franchisee to correct the deficiency and Franchisee will initiate the required action immediately upon receipt of the notice.

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as a franchisor you would be well advised to talk with inexperienced franchise attorney about the maintenance, repair and appearance of the franchisee in their business location and be prepared to address this issue not only in the confidential operations manual but also in the franchise agreements. Consider this to those experts.

"Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; http://www.WorldThinkTank.net/wttbbs/

A franchisor must insure that each franchised outlet maintains the equipment used in the business operation. To make sure that the services and products maintain consistency and quality the equipment must also be in top notched working order.

In our franchise agreement we decided to add a clause, which addressed this very issue. You see, I believe that not only is this important enough to have in the confidential operations manual, I believe it is sold vitally important to the operation of the franchised business that it must be addressed in the initial franchise agreement, before the commencement of the franchised business. Below is the clause.

3.18.2 Maintenance of Required Equipment

Maintenance and repair of Franchisee’s car wash truck/unit(s), washing equipment, credit card machine, car phone, pager, fax machine and computer system are Franchisee’s sole responsibility. Franchisee agrees to keep all tangible items used in the Franchised Business in excellent repair or fix any item, which is worn, breaks, becomes obsolete or mechanically impaired. All items replaced or repaired shall be done so with strict accordance to the standards, specifications and procedures outlines in the loaned copy of the Confidential Operations Manual.

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Since I am not an attorney, you may wish to contact the franchise attorney and ask them if such a clause in your franchise agreement makes sense for your franchising company. I hope you will 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/

Franchisee has a lot to do about image. Many marketers would agree that image is the single most important part of branding. In the world of franchising and brand-name extension franchisors and franchising companies must pay attention to details to ensure that their brand-name stands tall in the eyes of the consumer and customer.

There is probably no easier way to destroy a brand-name or image of a franchising company in a particular marketing region than to have a drunk driving accident with the company’s name on it show up on the front page of the newspaper. It is for this reason and because I am appalled by drunk drivers that I decided to do what no other franchise or has ever done in the history of franchising; I specifically addressed the drunk driving issue in our company’s franchise agreements. Below you’ll find the clause that I inserted into each and every franchise agreement;

3.24.2 Drunk Driving

Franchisee agrees not to drink and drive a mobile car wash truck or drive a vehicle while towing a mobile car wash unit of the Franchised Business on a public highway when Franchisee may be over the legal limit of toxicity. Franchisee also agrees not to drive their personal vehicle in the manner described above. Such violation of the law resulting in the conviction of a felony or misdemeanor is subject to termination of the Franchise Agreement.

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Perhaps this might be something you wish to address in your franchising company and you would be well advised to consult with a franchising attorney to see if this makes sense for your company as well. Perhaps they have a better idea of the legality of this issue. My thoughts, were not as much the legal issue as a statement of how I feel as the founder of my company about drunk driving and image. There are certainly other ways to address this issue such as a clause about moral turpitudes and your franchise attorney can better advise you on this issue, please consult with them, as all I am not an attorney. Do 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/