As a result of the current shift in how people live, work, and play, franchisors and franchisees face new challenges to their business model. These pressures, in addition to higher interest rates and the ending of COVID-related relief from Federal and State governments, have increased the financial strain on all levels of franchise systems. The linked guide provides an in-depth analysis of the various challenges and tools that may be available to franchisors, franchisees, and lenders to address this new economic environment.
What is the responsibility of the franchisee?
The franchisee's responsibilities include adhering to the franchisor's system, protecting the brand's image, managing local marketing efforts, building relationships, reporting back to the franchisor, financially supporting the business, and representing the brand effectively. While the franchisor provides resources and support, franchisees play a crucial role in ensuring the success and growth of their individual businesses within the broader franchise framework.
Franchising establishes a mutually beneficial relationship between franchisors and franchisees. In this partnership, franchisees acquire the privilege to operate under the established brand of the franchisor, leveraging their trademark and successful business model. This unique arrangement empowers franchisees to kickstart their own ventures with a proven track record of success.
What happens if the franchise fails?
However, if challenges arise and the franchise encounters difficulties, it's essential to take proactive measures. Start by initiating open communication with the franchisor to explore options like royalty waivers, additional training, or even territory repurchase. Additionally, engage with the landlord to discuss potential rent reductions or lease adjustments. If served with a notice of default, promptly seek professional advice to understand your options, including potential claims against the franchisor or exploring a sale to a third party. Selling the business can often be a clean solution, allowing the franchisee to terminate obligations under the franchise agreement and lease, and experts can guide you through this process. Early contact with professionals is crucial to navigate these challenges effectively.
The linked guide provides an in-depth analysis of the various challenges and tools that may be available to franchisors, franchisees, and lenders to address this new economic environment.
