Monthly Archives: November 2018

Is Amazon a Threat to Franchisees?

Nov 30, 2018 - Blog by |

Amazon has been taking business away from brick-and-mortar stores for years. Despite promoting the benefits of selling through its marketplace to small businesses, it is clear that Amazon (along with other online shopping platforms that offer fast shipping and easy returns) is increasingly becoming a threat to retail businesses that rely on a steady stream of customers to maintain profitability. But, even for franchisees who do not have to compete with Amazon for customers, there is another potential risk as well—particularly for those located near HQ2 and Amazon’s various shipping and fulfillment centers around the country: the risk of losing out on quality employees. According to a recent article on franchise news website BlueMauMau.org: “Mark Zandi, chief economist of Moody’s Analytics, pointed out in a conference call . . . that Amazon announced it was increasing its entry level wages to $15 per hour, which is more than double the federal minimum wage. ‘It is indicative of how tight this labor market is,’ said Zandi. “He anticipates that this will put increasing pressure on employers that employ lower skilled workers to also raise their wages. ‘I fully anticipate wage growth accelerating as we move to 2019.’” As Amazon and other companies start offering higher wages even at entry-level positions, franchisees who find themselves struggling to make payroll may face even greater struggles in the near future. Are Franchisees Hiring? Will They Be Hiring in 2019? However, even as wages trend upward (many states have minimum wages increases set to take […]

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NLRB Provides Franchise-Specific Guidance in Latest Update on Joint Employer Standard

Nov 23, 2018 - Blog by |

The legal standard for determining when an entity may be considered a “joint employer” of another entity’s employees has been in a state of flux since the National Labor Relations Board’s (NLRB) Browning-Ferris ruling in 2015. While the NLRB reversed the Browning-Ferris decision late last year, the uncertainty over the past few years left a host of lingering questions, particularly in the world of franchising. To address these questions, the NLRB has been working on a set of regulations to help clarify when the joint employer standard should be applied. It recently released a first draft of its proposed regulations. The Joint Employer Standard in Franchising The proposed regulations start by defining what constitutes a “joint employer” (a definition that is notably absent from the current regulatory framework). As proposed: “[A]n employer may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction . . . [and] a putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.” However, with regard to franchising, the NLRB has taken the position that, “[f]ranchisors generally exercise some operational control over their franchisees, which renders the relationship subject to application of the [NLRB’s] joint-employer standard.” Additionally, as noted in a recent article on BlueMauMau.org discussing the draft rulemaking, the […]

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What Can You Really Hope to Negotiate in Your Franchise Agreement?

Nov 16, 2018 - Blog by |

You have decided to buy a franchise. All that is left is to sign the franchise agreement and pay your initial franchise fee, and then you will officially own your own business. So, is it worth it to try to negotiate? Or, is it safe to assume that the franchise agreement is being offered on a “take it or leave it” basis? Unfortunately, over the past several decades, franchisors have honed the art of drafting one-sided franchise agreements. At the same time, franchise salespeople have come up with myriad ways to convince franchise candidates that negotiating is unnecessary. The truth is, if you are thinking about buying a franchise, it is strongly in your best interests to have the franchise agreement reviewed by an attorney, and most quality franchisors will expect you to request certain changes. Requesting Reasonable Modifications to Your Franchise Agreement So, the question then becomes, “What changes can I reasonably expect my franchisor to accept?” While there is no magic formula and nothing is ever guaranteed, some of the franchise agreement provisions that are most likely to be on the table include: 1. Initial Term Whether the initial term of the franchise agreement is too short or too long, this is a provision of the franchise agreement that often merits careful consideration. You want to make sure that you have enough time to recoup your investment, but you also want to avoid being locked in for too long if the business simply isn’t profitable. If you can […]

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Franchise Industry Statistics: Most-Popular Industries and Locations

Nov 9, 2018 - Blog by |

When buying a franchise, there are numerous factors that should guide your decision with regard to both (i) the type of franchise you choose, and (ii) where you choose to open for business. Statistics on the top franchised industries and top franchise locations can lean in both directions. On the one hand, it makes sense to choose a popular franchise in a location where people are used to shopping and eating at well-known brands. On the other, if you buy into too much competition in an over-saturated market, you could be setting yourself up for failure. Earlier this year, Franchise Direct published lists of the most-popular franchises and the locations that are most popular for opening a franchise. Neither list includes an explanation of its methodology, so take these for what they are worth. But, the rankings make sense, and even general trends are worth considering when deciding on the franchise opportunity that seems like the best fit for you. Most-Popular Franchised Industries According to Franchise Direct, as of May 2018, the 10 most-popular franchised industries in the United States were as follows: Food Franchises Children’s Franchises Coffee Franchises Home-Based Franchises Automotive Franchises Business Opportunities Vending and ATM Franchises Restaurant Franchises Cleaning Franchises Pet Franchises Notably, there is a bit of ambiguity in Franchise Direct’s list, as the list includes broad categories in addition to niche industries that could fall into one or more categories. For example, while “Children’s Franchises” ranks at number two, Retail Franchises come in just outside […]

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4 Special Considerations for Purchasing a Home Services Franchise

Nov 2, 2018 - Blog by |

Buying a home services franchise allows you to be your own boss; and, for many first-time franchisees, it means using your home as your “headquarters” and driving to job sites in your local area. For many franchise candidates, it offers the perfect blend of independence and day-to-day interaction. Many home services franchises also offer relatively low barriers to entry (i.e. a modest initial investment), and the time from signing a franchise agreement to opening for business can be relatively short. But, like all franchise opportunities, home services franchises also come with a variety of risks. If you are thinking about getting into the business of remodeling, repairing, upgrading or protecting other people’s homes, here are some key legal considerations to keep in mind: 1. Liability and Auto Insurance If you (or your employees, if any) will be going into other people’s homes and installing new materials, using cleaning solvents or pesticides, or making substantial modifications, the risk of something going wrong is something you need to consider. The best way to mitigate your risk of liability due to a personal injury or property damage claim (aside from conducting thorough due diligence) is to purchase adequate liability insurance. Since you will be driving on a daily basis, you will want to make sure you have adequate insurance coverage as well. Your state’s mandatory minimum coverage requirements may not be enough if you cause a serious accident, and you will likely need to purchase commercial auto insurance rather than a standard personal […]

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