Understanding Franchise Agreements
See the newsletter with all graphics at COMMON GROUND VOLUME 3 : ISSUE 3 NEWSLETTER ARCHIVE LINK. Text only version provided below, links only work in the full archived version via the link above.
Volume 3 : Issue 3
Welcome to Common Ground News
In this Issue:
* Feature Article – Understanding Franchise Agreements
* Tips & Techniques – helping you get the most out of our online mapping
application at GeoMetrx “Removing ZIPs from a Territory”
* Thematic Map – Territory Samples: County, ZIP, Census Block Group and Location-based territories – a closer look at how GeoMetrx can help you maximize your market potential
* Trivia Challenge – Counties and ZIP Codes: How many counties and ZIP Codes are there in the U.S. anyway?
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FEATURE ARTICLE:[facebooklike][twittertweet][googleplusone][lnkdinshare] Understanding Franchise Agreements
What is a franchise agreement and why is it important? Simply put, a franchise agreement is the legal document, or contract, between the franchisor and franchisee protecting the interests of both parties in the relationship. Without an agreement in place either party can “change the rules” at any time and not be held accountable for failing to meet obligations and responsibilities.
Be wary of going into business with any franchisor who does not offer a franchise agreement. A solid franchise agreement will set the foundation for a strong and long-term partnership.
No two franchise agreements are alike as the conditions and operations will vary from franchise to franchise and industry to industry. Nonetheless, the following is a list of the key components that should be included:
the length of time the franchise agreement is in place. Most franchise agreements extend out for several years with automatic renewal options to continue the franchisor and franchisee relationship if both parties have complied with the terms of the agreement. Note: typically any changes to the franchise agreement during the initial term are automatically incorporated at time of renewal.
the geographic area of operation for the franchisee along with any exclusivity rights (note: not all franchisors provide for protected territories). This section may also include the option of ‘right of first refusal’ to obtain adjoining territories which are not yet franchised or become available in the future.
both initial start-up fees and any continuing fees, such as purchase of supplies directly from the franchisor, marketing and advertising, management assistance and on-going training, and any other fees specific to a particular franchise or industry. Any and all fees whether one-time or recurring should be addressed within the agreement.
most franchisors provide a manual, as part of the franchise agreement, that lays out all the rules, restrictions and obligations of both parties in the day-to-day operation of the franchise. Successful franchises include complete provisions in the agreement that protect the brand’s standards, reputation and quality, ensuring that all franchisees are offering the same level of products and services.
the percent of monthly sales (typically 4-8%) to be paid to the franchisor. In addition to the initial start-up fee, franchisors rely on a share of each franchisee’s sales. These payments help maintain the system allowing franchisors to keep up with technology, create new marketing and advertising campaigns, develop new products and services, etc., creating a “win-win” situation for both parties.
- DISPUTE RESOLUTION / TERMINATION
in the event there is a disagreement regarding the obligations and responsibilities of either party, the franchise agreement should contain a policy for resolving any disputes. Additionally, should either party wish to terminate the agreement, rules governing the dissolution should cover possible resale of the franchise to another franchisee, settlement of any franchise property, post-termination expectations (e.g. a non-compete clause), etc.
Franchisees are strongly encouraged to retain an experienced franchise attorney before signing any agreement. It is important to carefully review the entire document and analyze each and every provision. While some provisions can be modified, others are subject to franchise regulations, as well as local and state laws.
A good franchisor will work with a potential franchisee making sure both parties are comfortable with the arrangements. The franchise agreement negotiations will likely be a franchisee’s first true indication as to the nature and future course of the relationship. The newly formed relationship needs to be a healthy partnership and not adversarial. If negotiations are a positive team effort, that is a good sign for things to come!
In addition to the services that a franchise attorney can provide, combining those efforts with an online mapping solution for territory management is invaluable. For more information on how GeoMetrx can help, call us today at 1.888.848.4436 or request a free demo online. Let our experts help you make the most of your business.
TIPS & TECHNIQUES:
Removing ZIPs from a Territory
Creating territories in GeoMetrx is one of the most valuable assets of our online application. Once territories are created there are many ways to customize them to meet your exact needs. ZIP Codes can be helpful for some companies and ‘clutter’ for others. Additionally, when realigning territories it may become necessary to remove certain ZIP Codes. It’s easy to do, just follow the simple steps in our:
“How to Remove ZIP Codes from a Territory Guide”
THEMATIC MAP: [facebooklike][twittertweet][googleplusone][lnkdinshare]Territory
Definitions – Geographical Boundary Options
Creating and managing territories is important for both the franchisor and the franchisee. In order to define a territory, one must have a geographical basis or boundary delineator. Smaller territories are often defined by ZIP Codes, while larger territories can be defined at the county or even state level. For even more finite planning, GeoMetrx can create territories down to the Census Block Group level, i.e. the smallest geographical unit for which the Census Bureau publishes sample data, typically containing only a fraction of all households.
GeoMetrx has the power to easily create balanced territories at any of these levels incorporating a wealth of demographic data. Users can visualize the territories on an interactive map as well as work with the data in a variety of report formats. Proprietary customer data can also be uploaded and utilized to further create, balance and manage territories.
Below are several sample territories built using different geographic boundaries as well as an additional sample of location-based territories. Location-based territories work well for sales teams that have more than one representative operating in the same geographic area. For example, Rep 1 may manage one type of account (e.g. residential) while Rep 2 may manage another (e.g. businesses) within the same market area. In the samples below, each unique territory is color-coded. The geography chosen to create territories will vary depending on the industry, the market area (urban vs. rural) and the demand-level for the products or services offered by the franchise.
• COUNTY LEVEL TERRITORIES
• ZIP CODE LEVEL TERRITORIES
• CENSUS BLOCK GROUP LEVEL TERRITORIES
• LOCATION-BASED (ACCOUNT) TERRITORIES
GeoMetrx has the tools you need to assess the opportunities, locate the ideal site location, evaluate the competition and create well-balanced, optimized territories. For more information on how to obtain access to GeoMetrx tools and datasets, contact us today at 1.888.848.4436.
Fall 2014 – Counties and ZIP Codes
We all know there are 50 states in the U.S., but do you know how many counties and ZIP Codes there are altogether?
1) Do you know the total number of counties and county equivalents in the U.S. including D.C.?
2) Do you know the approximate number of ZIP Codes in the U.S.?Click Here for the Answers