The labor market is posing significant challenges for many franchisees in 2022. This is especially true in large cities like Chicago. When franchisees can’t hire, they can’t run their businesses effectively, and this means they risk losing customers, revenue and potentially even their franchise rights. So, what can franchisees do given the current state of affairs? Here are some insights from Chicago franchise attorney Jeffrey M. Goldstein.
Franchisees Need to Review Their Franchise Agreements
Before operating understaffed or pursuing creative recruiting options, franchisees need to review their franchise agreements. This includes reviewing their Operations Manuals, which are almost certainly incorporated into their franchise agreements by reference. If your franchise agreement requires you to maintain a certain number of on-site staff members at all times, or if your Operations Manual restricts how you use social media (or other potential recruiting options) in connection with your franchise, you will need to be careful to avoid breaching your agreement.
Franchisees Need to Remain Committed to System Compliance
In this same vein, franchisees that are facing staffing challenges need to remain committed to system compliance. If you don’t have the staff you need to stay open during required operating hours or provide adequate customer service, it is up to you as the franchise owner to find a way to make things work. Whether this means paying overtime to your current staff or putting in more hours yourself, you will need to figure out what you need to do to protect your franchise.
Franchisees Need to Invest as Necessary
As job candidates demand higher wages, many franchisees are finding that they simply cannot afford to hire while still paying their royalties, marketing fund contributions and operating expenses. If you need to hire more staff but can’t afford to offer a competitive wage or benefits package based on your franchise’s revenue, you may need to consider investing more money in the business in order to avoid being held in default. Of course, as a franchisee, you also need to avoid throwing good money after bad; and, if you do not see a path to profitability before your franchise agreement term expires, it may be time to consider other options.
Franchisees Need to Be Proactive if They Are At Risk of Termination
If your franchise is at risk due to staffing challenges (or revenue shortages caused by staffing challenges), you will want to address your situation proactively. You may have options for negotiating with your franchisor, but these options will likely go away once your franchisor declares you in default. Whether you want to save your franchise or get out with as little financial liability as possible, you should discuss your options with an experienced Chicago franchise attorney promptly.
Request a Free Consultation with Chicago Franchise Attorney Jeffrey M. Goldstein
If you need to know more about how franchisees can (and should) protect themselves when facing financial challenges related to the labor market, we encourage you to get in touch. Call 202-293-3947 or contact us online to request a free consultation with Chicago franchise attorney Jeffrey M. Goldstein.
