Luxembourg-based JAB Holding Co. recently announced that it will be combining Panera Bread, Caribou Coffee and Einstein Bros. Bagels under its newly-formed Panera Brands. As reported by the Franchise Times, “the goal is to spread the expertise at the top across all brands and make major investments in technology and growth easier to digest . . . [and t]he infrastructure that helped Panera become a dominant fast-casual cafe will help ‘turbocharge’ growth for Caribou and Einstein.”
While the formation of Panera Brands as the umbrella for Panera Bread, Caribou Coffee and Einstein Bros. Bagels is notable for its size, it isn’t unusual for franchisors to combine. In fact it happens all the time. But, when it happens, what does this mean for the franchisors’ respective franchisees? Franchisee lawyer Jeffrey M. Goldstein shares his thoughts:
Consolidation and Streamlining Can Lead to Additional Costs for Franchisees
While combining franchise systems under one umbrella allows for consolidation and streamlining at the franchisor level, it can have the opposite effect for franchisees. If franchisees are forced to adopt new systems, utilize new suppliers or make other mandatory changes, they can suddenly face substantial capital expenditures that they might or might not be able to afford. Changing the way they operate also means conducting training and perhaps hiring or firing employees—and this can divert time and attention away from meeting customers’ demands.
Yes, it might all work out for the better in the long run, but franchisees must be able to survive in order to benefit. In some cases, consolidating management can also result in franchisees having less contact with their franchisors—particularly if their personal contacts are pushed out of the system.
Franchisees Ultimately Have Little Say in What Happens
Although franchisees might have plenty about which to complain, they ultimately have little say in what happens. Franchisors reserve broad rights in their franchise agreements—including the right to require “updates” or “upgrades” at franchisees’ expense. If a combination of franchise systems works out unfavorably in any way, franchisees must generally find a way to cope (unless they can find someone who is willing to buy them out for a reasonable price).
With that said, franchisees can have a stronger voice if they work together. Many franchisors will take complaints and demands from franchisee groups and associations seriously. So, if your franchisor has recently merged, and if you are dissatisfied with the consequences of the merger, it may be worth considering some sort of unified action. A franchisee lawyer can help—whether an association exists already or you need to form a group or association in order to have your voice heard.
Contact National Franchisee Lawyer Jeffrey M. Goldstein
Jeffrey M. Goldstein is a national franchisee lawyer who has more than 30 years of experience in franchising. If you would like to speak with Mr. Goldstein about your franchise, you can call 202-293-3947 or get in touch with us online to schedule a free and confidential consultation.
