Franchise Articles

When you are looking for information about franchise opportunities online, you will find lots of sites that promote their own franchise rankings and offer franchise reviews.  While some of these rankings and reviews provide useful insights, it is important to understand their limitations as well. If a franchise is ranked first in a particular category, what does this mean, exactly? How do different sites come up with their rating systems, and how do they choose which franchises to review? These are crucial questions; and, when analyzing rankings and reviews, it is necessary to go beyond the ranking or review itself and consider the factors upon which each ranking and review is based. Fact #1: Many Rankings and Reviews are “Pay for Play” Many websites require franchisors to pay in order to receive consideration for their rankings, and many franchise reviews are provided on a paid basis. However, this fact is often obscured in the published ranking or review. Obviously, paid reviews should be taken with a grain of salt, and it will be important to gather information about the franchise from several unbiased sources as well. Fact #2: All Franchise Rankings are Based On Selected Data All franchise rankings are based on selected data, and many rankings weight certain factors more heavily than others. As a result, when reviewing rankings, it is important to examine the ranking criteria in order to discern exactly what it means for one franchise system to be ranked above or below another. Fact #3: Franchise […]

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Food franchises account for nearly a third of all franchised outlets in the United States. As a result, the health of the food franchise industry is crucial to the health of the franchise industry as a whole, and trends in food franchising often make their way into other sectors. 5 Key Insights About the Food Franchise Industry So, as we move forward in 2021, how is the food franchise industry doing? FranchiseDirect.com recently provided an overview. Here, franchisee attorney Jeffrey M. Goldstein covers some of the highlights. 1. The Food Franchise Industry has Been Hit Hard By the Pandemic, But is Still Poised for Long-Term Growth Many food franchises have been hit hard by the pandemic. Mandatory closures, capacity restrictions and other economic impacts of the pandemic have been felt across virtually all segments of the food industry. However, many of the leading food franchise systems have shown both adaptability and resilience, and those with the capital to weather the storm remain poised for long-term growth. 2. Some Recent Trends are Starting to Take Hold Some recent trends that seemed like they might fade are starting to take hold. Many of these trends are health and fitness-related. For example, juice franchises are still growing in popularity, and new vegan and vegetarian franchise concepts are emerging while many of the mainstay franchise concepts are adding vegan and vegetarian options to their permanent menus. 3. Established Models and Franchise Systems are Holding Strong While new trends are emerging, established models and franchise […]

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The COVID-19 pandemic has had an unprecedented impact on our education system. With many students missing months of school in 2020, and with students across the country attending class remotely and relying on working parents for daily guidance in 2021, experts are forecasting long-term impacts for students of all ages. As reported by the Organization for Economic Co-operation and Development (OECD): “This crisis has exposed the many inadequacies and inequities in our education systems – from access to the broadband and computers needed for online education . . . up to the misalignment between resources and needs. The lockdowns in response to COVID-19 have interrupted conventional schooling with nationwide school closures . . . [and w]hile the educational community have made concerted efforts to maintain learning continuity during this period, children and students have had to rely more on their own resources to continue learning remotely . . . .” Given these impacts, parents across the country are looking to non-traditional venues to ensure that their children are able to receive the education they need. This includes relying on education franchises. Should You Invest in an Education Franchise During the COVID-19 Pandemic? If you are thinking about investing in an education franchise during the COVID-19 pandemic, there are several important factors you will need to consider. While the short-term demand may be enticing, this is just one of numerous considerations that should ultimately guide your buying decision. Here is an overview of some of the key issues involved in buying […]

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While the start of the New Year was a symbolic refresh for many people, as 2021 is now in full swing, it is clear that things are still far from normal. Spikes in COVID-19 cases are once again triggering new shutdowns and restrictions around the country, and many business owners – franchisees in particular – are struggling as a result. If your franchise is at risk in 2021 due to the effects of the pandemic, what do you need to know? Here are some important insights from franchise lawyer Jeffrey M. Goldstein: 1. Lots of Franchisees are Going to Struggle in 2021 First, if your franchise is struggling, you are not alone. The COVID-19 pandemic has hit the franchise industry particularly hard, as many franchises either: (i) operate out of retail locations that have faced restrictions, (ii) provide products and services that consumers and businesses have cut out of their budgets due to the economic effects of the pandemic, or (iii) are facing both of these challenges simultaneously. 2. Some Franchisors are Offering Grace to Struggling Franchisees During the pandemic, some franchisors have launched initiatives focused on helping struggling franchisees. These initiatives range from providing loans to deferring royalty fees and cutting other mandatory expenditures. If your franchisor is offering support to franchisees during the pandemic, this may be an option you will want (or need) to consider. However, it will be important for you to read the fine print as well. 3. Financial Relief Programs May Be an Option […]

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Entrepreneur.com recently released its Franchise 500 list for 2021. The Franchise 500 is the online media platform’s annual ranking of the best franchises in the United States. If you are thinking about buying a franchise listed on the Entrepreneur.com 2021 Franchise 500, we encourage you to inquire about one of our fixed-fee franchise business review programs. In ranking the “best” franchises in the United States, Entrepreneur.com weighs a variety of different factors. This includes everything from the cost of ownership to brand strength, and from the franchisor’s financial stability to the overall franchise system’s size and growth. As with any ranking, the Entrepreneur.com Franchise 500 is somewhat subjective, and different metrics could be used to produce very different rankings. With this in mind, here are some notable takeaways from this year’s list: 1. Big-Name Brands Dominate the Top 50 There is a good chance that you will recognize every single brand represented by the top 50 franchises in the Entrepreneur.com Franchise 500. Big-name brands dominate the top of the list, as has been the case in years past. This is due in large part to the methodology used to determine the franchises included on the list. Farther down the list, however, you will see many smaller and lesser-known brands. 2. The Food Franchise Industry Remains Strong Five of the top 10 and nine of the top 20 franchises in the Entrepreneur.com Franchise 500 are food concepts. Taco Bell took the top spot, followed by Dunkin’ in second and Popeyes Louisiana […]

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Attending large franchise conventions and visiting the franchisor’s headquarters are two hallmarks of the franchise due diligence process. They are also two events that have largely been put on hold during the COVID-19 era. But, franchisors are still selling – and franchisees are still buying – and those who are thinking about buying a franchise must still perform thorough due diligence in order to make an informed buying decision. Here are franchise attorney Jeffrey M. Goldstein’s tips for conducting franchise due diligence during the COVID-19 era: 1. Spend Time on the Phone with the Franchisor’s Representatives Franchisors are getting creative in order to attract franchise candidates and convince strong candidates to move forward with opening a franchise during the pandemic. If you are not able to visit the franchisor’s headquarters in person, you should feel free to spend as much time as you need with the franchisor’s representatives on the phone. Franchisors are using Zoom and other platforms to provide virtual tours and host group meetings, but you can (and should) schedule as much one-on-one time as you feel is necessary as well. 2. Get in Touch with Current and Former Franchisees Talking to current and former franchisees is a key component of franchise due diligence. Current franchises in your local area may be willing to arrange a tour (if you are comfortable doing so), and you will likely find that both current and former franchisees are more than happy to give you an hour or so on the phone. […]

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If the start of the New Year has you thinking about buying a franchise, there are several important factors you will want to consider as you evaluate different franchise opportunities and make your final decision about moving forward. While many of these factors have to do with the financial aspects of buying a franchise, you need to consider the pertinent legal issues as well, as failing to protect yourself legally could potentially put your franchise in jeopardy. Here, national franchise lawyer Jeffrey M. Goldstein discusses four important legal considerations for individuals who are thinking about buying a franchise in 2021: 1. How Have Other Franchisees Fared During the Pandemic? Even once the COVID-19 vaccine is available to everyone nationwide, things still won’t fully be back to normal for some time. As a result, while there is reason for optimism in 2021, as a prospective franchisee, it is still important to take cues from 2020. Within the brands you are considering, how have existing franchisees fared during the pandemic? Are they optimistic about the future? You can find franchisees’ contact information in the Franchise Disclosure Document (FDD), and you can – and should – speak with many franchisees during the due diligence process. 2. What Will Happen if Your Franchise Isn’t Successful? No one wants to think about the possibility of failure when buying a franchise. But, the reality is that addressing this contingency is one of the most important aspects of ensuring that you have reasonable legal protections before you […]

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The COVID-19 pandemic has forced the vast majority of Americans to spend more time at home, and it has had a hugely detrimental impact on the brick-and-mortar retail sector. Even with some light at the end of the tunnel heading into 2021, there are still many unknowns, and many experts are suggesting that consumers’ enhanced reliance on home services and home delivery will be an enduring trend. Given these considerations, buying a mobile franchise may seem like a good option. If you are thinking about buying a mobile franchise, what do you need to know? Here are some tips from national franchise attorney Jeffrey M. Goldstein: 1. Make Sure You Know What it Takes to Succeed Succeeding as a franchisee requires different skills and a different mindset than succeeding as an independent business owner. While you will need some of the same general business skills, you will also need to be able and willing to operate within the confines of the franchise system. While there are no true “keys” to success, there are steps you can take to improve your chances of building a profitable mobile franchise. 2. Make Sure You Know Why Franchises Fail In addition to knowing what it takes to succeed, it is also important to know why franchises fail. Building a successful franchise requires more than the ability to market and operate a successful business. Your success will be contingent upon your franchisor’s business practices as well; and, in many cases, franchisees fail because their franchisors […]

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Signing a franchise agreement signals the end of one process and the beginning of another. You have completed your evaluation of competing franchise opportunities and due diligence, and now you are officially a “franchisee.” So, what’s next? Here, franchise lawyer Jeffrey M. Goldstein explains what happens after you sign a franchise agreement: What Does It Mean to Sign a Franchise Agreement? A franchise agreement is a binding contract that establishes the franchisor’s and franchisee’s respective rights and obligations. Once you sign, there is no going back. You are committed to building and running your franchise, and you must now begin thinking in terms of what is and isn’t allowed under the terms of your agreement. You will soon be required to pay your initial franchise fee (if you haven’t paid it already), and this fee is almost certainly non-refundable under the terms of your franchise agreement. You probably only have a certain number of days or months to get your franchise up and running as well; and, even if you don’t open in time, you could still be liable for making monthly royalty and marketing fund payments. What Are Your Next Steps After Signing a Franchise Agreement? Once you sign a franchise agreement and pay the initial franchise fee, what are your next steps? Typically, you will be required to participate in some form of training, and you will need to execute a plan for meeting all of your franchise agreement’s other pre-opening requirements. You will need to find vendors, […]

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Question: How Do Franchise Exclusive Territories Work? Answer: They Usually Do Not By: Jeffrey M. Goldstein jgoldstein@goldlawgroup.com 202-293-3947 In a recent franchise case before the United States District Court for the District of Colorado, the trial Court granted in part and denied in part the Defendant Franchisor’s motion to dismiss the Franchisee’s encroachment claims. Plaintiff Zubair Kazi was a president of numerous companies that owned and operated franchises across the United States, including a KFC location in Pueblo, Colorado, KFC of Pueblo (Kazi and KFC of Pueblo together the “franchisee”). Defendant, KFC US, LLC (“KFC” or the “franchisor”) was a national franchisor of Kentucky Fried Chicken restaurants. The case arose when KFC licensed another KFC restaurant (“outlet”) near the franchisee’s then-current location. The parties executed an initial Franchise Agreement (“Franchise Agreement”) allowing the franchisee to prepare fried chicken and other food recipes and to market them with certain trademarks and service marks, and thereafter a renewal Franchise Agreement on June 1, 2017. The Court identified the following provisions in the Franchise Agreement as “relevant”: 3.6 Except as provided in subsection 3.8, during the License Term KFC shall not use or license others to use any of the trademarks licensed hereunder in connection with the sale of any food products at any location within a radius of one and one-half miles of the Outlet, unless [exceptions not relevant here]. Right to Apply for New Franchised Outlets. Before permitting the establishment of any new franchised outlet (defined below) at a location closer […]

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