I have had the pleasure & honor to be involved in business & franchising as an independent business owner, a franchisee & franchisor for 30 years & have never seen times like these; both in terms of challenges & opportunities. The last 10 years has seen an explosion of growth in franchise opportunities & franchising. Like many other areas which have seen massive; some say unchecked growth, has franchising created a bubble which may be about to burst?

Over years I have coached, consulted & advised people on franchising. Some of the concepts were good & sound & franchising was an option. The past couple years, however I have spoken to more & more people who wanted to jump on the franchising bandwagon who should not have become a franchise system or at least not until the concepts were more proven & more prepared.

About two years ago, I had my first experience working with a company which was in the process of dismantling their franchise system. Recently, I have worked with several other companies on how they might “de-franchise” without having to close the company or bankrupt the system & loose the brand & other benefits franchising offers by becoming more of a “confederacy” or a “chain” so zees have the opportunity to continue to grow, protect the brand, image & still protect the integrity of franchising, which has the most to loose every time a franchise network fails.

I will be in DC & attending the IFE as a visitor & have meetings with a couple of zors who are looking for alternatives.

Has "de-franchising" become a trend in the industry?  Does the Franchise Agreement typically provide the franchisor with a "buy out" option?

Thank you,

Tom

Tom Bondon | President
Internet Powered Solutions
http://www.theFranchiseEngine.com
http://www.theFranchiseMarket.com
http://www.theBusinessMarket.com
http://www.AllFran.com

Tom,

De-franchising has not become a trend and openly I hope it does not. In my original post, I left out a word where I said this is a solution for everyone. It was supposed to read, this is NOT the solution for everyone. I do believe this is an option for a number of franchise systems which are struggling to reach and most likely will not reach “critical mass”. Critical Mass is where the royalty revenue stream is sufficient to pay for the ongoing operation of the franchise systems support and growth and the franchisor is not dependent on the upfront and franchise fees to succeed.

In such systems where critical mass is not occurring or there is no realistic point it will occur; then de-franchising may be a viable option. I was in DC at the IFE and several people had read the post and wanted to discuss it further. We are in the process of completing a presentation which explains in more detail how de-franchising works, the pros and cons as well as the potential costs and benefits.

Please keep in mind; the goal is to protect the integrity of franchising while searching for an alternative solution to shutting a system down or bankrupting it. If you could disassemble a franchise system in such a way as to have the zees still have a way to continue operating and actually growing using the value of the brand; would this not be good for the zee, their employees, their communities and franchising as a whole? If a lawsuit was filed against the zor, the legal fees could be many, many more times the cost of de-franchising and the bad PR would most assuredly destroy any good will or positive brand recognition which may exist.

We have identified some key indicators to look at which appear to identify if a franchisor should consider de-franchising and a “red, yellow, green light” approach to help monitor franchisors who may be heading for troubled waters.

If anyone would like to know more, please feel free to send me an email or give me a call and I would be happy to discuss the topic further.

Succeed again in 2010!

Christopher Simnick, CFE

Managing Member - Synergy Franchise Group, LLC

Synergy Franchise Group Network

West Palm Beach, FL

Cell: 561.385.3032 Office: 561.629.8121

chris@sfgnow.com

www.sfgnow.com