What’s the last thing new franchisors need?

If you are going to franchise your business, domestically or internationally, the last thing you want is a lawyer.
That’s the opinion of Brian Duckett, a British author who has spent over 30 years as a franchisee, franchisor and a franchise consultant. It’s a deliberately provocative statement, but Brian rationalises it thus: franchising is not a legal relationship with commercial aspects; it is a commercial relationship with legal aspects. Accordingly, it’s not until you have worked out all the commercial relationships and completed the franchise development plan – complete with its fee structures and pilot studies ­­– that you know you have a potentially successful franchise network. Only then should you reach for your lawyer to enshrine in an agreement the legal framework that will underpin the commercial relationship.
In his book, How to Turn Your Business Into The Next Global Brand, Brian also notes that when the time does come to consult a lawyer, you need to consult one experienced in preparing franchise agreements. He writes, ‘Many potential franchisors make the mistake of contacting one of the less experienced lawyers, saying, “I’m going to franchise my business, I’ll need a franchise agreement, can you prepare one for me?” Typically, the reply is, “Yes, of course. What would you like in it?”’
‘The problem is that the client doesn’t know what he wants in it if he hasn’t had expert practical advice – and nor does the lawyer. He may know the matters to be considered, but he won’t know which option to choose.’ The result can be an agreement which serves only to formalise a flawed business structure. 
Although writing about the UK, Brian Duckett has highlighted a concern that is at the heart of ongoing opposition to plans by the Auckland District Law Society to introduce a standard franchise agreement – something I mentioned in this column back in April. One of the arguments made in favour of the plan is that ‘some people are going to franchise their business on the cheap anyway, so isn’t it better that they have access to a proper form of document that at least encourages them to think about what they need to include?’ As one opponent of the plan pointed out, it’s an approach reminiscent of that taken by the leader of the city of Ankh-Morpork in the alternative universe of Terry Pratchett’s Discworld books. The leader encourages the establishment of a licensed Thieves Guild in the city on the basis that, if crime is going to happen anyway, it might as well be organised crime.
Opponents to the standard franchise agreement plan are concerned that, if the document makes it even easier for an inadequately-developed franchise to be marketed without professional guidance, it will not only endanger the reputation of franchising but also run the risk of luring new franchisees into businesses that are apparently soundly-structured when, in fact, they are nothing of the sort. The same risk, of course, can apply to any franchise that has not been properly developed, regardless of who has created the franchise agreement. However, at least a good, experienced franchise lawyer will check that the franchisor has conducted a proper feasibility study and will want to be briefed accordingly. That’s why, as Brian Duckett suggests, the study comes first and the last thing a new franchisor needs is a lawyer.
Or almost the last, anyway. My own belief is that the very last action that a new franchisor should take is to begin recruiting for franchisees. That might sound odd coming from someone who has published franchise recruitment advertising for 20 years, but it’s true – in fact, you’d probably be surprised at how often I and my colleagues have encouraged people to delay their advertising until they are completely ready, or suggested they go and get some expert advice before proceeding. 
The reason for this is that even a good franchise system is worth nothing unless the franchisor takes the time and thought to appoint the right franchisees. As well as properly structuring, protecting and proving the business concept, a new franchisor must also define the qualities a new franchisee will need to operate the business successfully. Only once they have created this profile – and developed ways of screening applicants to ensure that only those who qualify are granted the franchise – should the recruitment process start. It may take a little longer, but it will start to pay back immediately as the franchisor can immediately target their recruitment message more effectively. That will improve response, reduce time-wasters and, best of all, ensure that the right franchisees are appointed right from the start.
By the way, if you’d like to learn more about franchising and get a feel for the sector, come along to the Business Opportunities & Franchise Expo in Auckland this month. It’s taking place from 12-14 August and you can download a free ticket from the Franchise New Zealand website at www.franchise.co.nz. I’d love to meet you there.

Simon Lord is publisher of Franchise New Zealand magazine and website, which provides franchise information and details of business opportunities and professional advisors nationwide. 
A free copy of the magazine is available from www.franchise.co.nz