Strong brands create strong business

Franchising was built on the premise of branding and its ability to drive consumer demand. Behind every successful franchise business stands a strong brand.

A strong brand has top of mind awareness among consumers and enjoys consumer loyalty and affinity. But strong brands do not exist by accident. It takes a lot of hard work to create one. And once created, brands need to be nurtured and treasured to survive in an ever-changing, increasingly demanding business environment.

So why is it that so many franchisors choose highly descriptive and almost unregistrable trade marks as their brands?

A common mistake made by franchise businesses (as well as other businesses) is to choose a brand that tells the consumer something about the product or service they are offering. Examples include QUIK CLEAN for home cleaning services. These sorts of descriptive brands are not usually registrable as trade marks.

If the trade mark you choose is unregistrable, your business loses the opportunity to lay claim to one of its most valuable business assets.

Selection of a strong and distinctive brand is vital. Customers will choose a well-recognised brand for a product or service over a lesser known brand. A strong brand creates a point of difference in the marketplace. The reputation of a brand and the fact that it is widely known and recognised by customers is one of the reasons why a franchisee chooses to own a franchise business rather than set up a business and create and build a new brand of their own.

Franchisors that do not support the strong brand concept risk diluting their brand. Those that do not protect their brands as registered trade marks could be committing business suicide. All brands connected with a franchise should be protected if possible. This may include the name and logo, specific product or service brands provided as part of the franchise system, the colours of the business get-up and packaging as well as product and packaging shapes to name a few.

The marketplace is cluttered with competing businesses and it can be hard to stand out. Choosing a brand that has its own personality and imagery, and that is different from the brands of competitors, will be more memorable. Being ‘the brand’ your customers think of when they need a particular product or service will give a business the competitive edge it needs to survive, and a brand that creates a point of difference will make the business a more attractive franchise proposition for everyone involved.

If you would like to know more please read the full version of this article or talk to someone in our franchise team.

Busting myths about franchise agreements

The key to a successful franchise is a positive working relationship between the franchisor and the franchisee. The first test of this relationship will be developing a franchise agreement. But there are many myths and pre-conceptions about franchise agreements that can cloud the relationship from the outset.

MYTH: A hand-shake will do - we don’t really need a franchise agreement.

TRUTH: The franchise agreement provides a legal framework for the long-term interaction between the franchisor and the franchisee.

It is in both parties’ interests to devote sufficient time and resources to negotiating and drawing up an accurate agreement. The franchise agreement should be a meaningful and dynamic instrument which can survive the length of the franchise relationship. A written agreement will mean each party is aware of their rights and obligations and the process for resolving disputes from the outset.

MYTH: A franchise agreement is an immutable, static list of obligations.

TRUTH: It is true that traditionally, franchise agreements looked consistent and uniform. But as franchising evolves and knowledge in this sector develops, a more flexible approach is required.

From the franchisor’s perspective the contract needs some degree of uniformity to avoid accusations that individual franchisees have been treated differently or unfairly. Also, the franchisor needs to ensure its assets are adequately protected, so it is inevitable that the franchisor will require many of the same key obligations from all the franchisees. As with any commercial negotiation there will be issues on which the franchisor is unable to alter its position, but there should also be areas where a degree of accommodation is possible. The advantage to be gained from such accommodation can vastly outweigh the seeming sacrifice at the negotiating table.

The term “franchise” has evolved from the Middle French “franchir” meaning “to free”. The concept of freedom or flexibility should be the basis for every franchise agreement.

MYTH: The franchise agreement is heavily slanted in favour of the franchisor.

TRUTH: Certainly the odds are stacked in favour of the franchisor at the outset because the business belongs to the franchisor, the franchisor usually drafts the contract and associated franchising manuals, and the franchisor is perceived to select the franchisee. In reality however there is much scope for manoeuvre in negotiating the agreement and franchisees should never underestimate the potential leverage they possess. It is always open to the franchisee to seek to redress the balance to achieve the deal that best suits its requirements.

MYTH: The franchise agreement and related negotiations are a mere formality and a one-size-fits-all precedent agreement will do the trick.

TRUTH: All franchise relationships are as individual as the parties involved. Tailoring an agreement to reflect the specific needs of each franchise relationship will be a key for future success.

If you would like to know more please read the full version of this article or talk to someone in our franchise team.

Top five franchising tips

Here are five basic issues to start with when you are considering entering into a franchise.

1. Talk to current owners

• Ask questions to get a comprehensive understanding of the business and its daily operations.
• Find out about the owner's experiences of owning a franchised business.
• Check that the information in the disclosure document matches what the owners tell you.
• Seek feedback about the amount of work claimed against what is actually required.

2. Investigate financial claims

• Talk to current owners about promised earnings versus actual earnings.
• Get earning claims in writing with an explanation of how they are calculated.
• Seek information on how many owners have actually met the claimed earnings potential.
• Find out what the total costs are to get into the franchise including any required royalty fees.

3. Listen carefully to the sales presentation

• Look out for exaggerated statements.
• If intense pressure is used to get you to sign up NOW, beware.
• Understand the terms for termination and the conditions for resale.

4. Get promises made in writing

• In the case of a dispute, the written contract will count. Don’t rely on the strength of statements in promotional materials or other written materials.
• Make sure you record the statements made to you in writing.

5. Study what you are signing

• Carefully review all documents relating to a franchise arrangement.
• Get financial records and earnings estimates analysed by an accountant familiar with franchise accounting.
• Check with an experienced franchise lawyer to ensure you fully understand the contract and your obligations.