Dilemma of Franchise Holders - Dilemma of Franchise Holders Multi-Site Franchisees There appear to be more multi-site franchisees being approved this is

Dilemma of Franchise Holders - Dilemma of Franchise Holders...

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Dilemma of Franchise Holders Multi-Site Franchisees There appear to be more multi-site franchisees being approved this is where one operator is permitted to own multiple locations under the same franchise system. This makes sense, at least on a superficial level. Why not grant another franchise to a successful franchisee. They will not need to undergo extensive initial training. They have already proven themselves in the system. They are likely to be able to borrow based on the existing cash flow and borrowing capacity of the existing business. They know the brand and are already part of the franchise “family”. There are clearly many benefits in allowing an existing successful franchisee to expand. And many franchise systems have openly and publicly encouraged this, including Shaver Shop, Hair house Warehouse, Boost Juice and Anytime Fitness to name a few. However there are risks and costs associated with encouraging multi-site franchise ownership. Normally there is a prohibition on a franchisees owning more than one franchise in the template franchise agreement and for good reason. There is a need for continuity in the running of any individual business and there is generally a provision in the franchise agreement requiring the manager to be “full time” in the business. In addition, often the franchisor requires the “nominated manager” to be the actual business owner franchisee to ensure there is “hands on” management of the business. When a franchisee purchases a second or third, or fourth franchise, how is that person going to divide their time between the stores particularly if they are far apart. Does the franchisor allow the franchisee to run each store part time and grant an exemption to the standard provision or will the franchisee be allowed to employ managers to run some stores. If so, what happens to operating standards and customer care in the remote stores In addition, consider what happens if the relationship sours and the franchisor has to breach the franchisee. If one franchise business is terminated for poor performance, will the relationship be
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  • Spring '14
  • franchisee

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