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Flexible Contracts are Key to Long-Term Franchise Success


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“What happens is you write a contract in 1988, and then it’s 2013 and the world has changed.” That’s how Ken Walker, former CEO of Driven Brands, puts it when describing the need for flexibility in franchisor contracts.

Walker knows that sinking feeling, when your business model is out-of-date. He was CEO when his company was called Meineke Mufflers, in the 1990s, and he oversaw the transition to Meineke Car Care Centers.

The reason for the change: “If 75 percent of what you sell is mufflers and someone makes a muffler that doesn’t wear out,” you’ve got trouble, Walker says. “So look at the long-term metrics of the business model.”

Walker was one of three speakers at a recent Association for Corporate Growth meeting in Minneapolis about private equity firms investing in franchises. Gaylen Knack, attorney at Gray Plant Mooty and another speaker, agrees that flexibility has to figure into the contract.

“What rights are being granted to the individual franchisee and what rights are being retained by the franchisor?” is the key question for Knack. “That language and the reservation of rights becomes very important in offering a glimpse of what the franchisee is getting.”

What stays out of the contract is important, too. For example, the types of goods and services offered should be part of the operating manual, not the contract, so franchisors can adjust to the times, he says.

 

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Tom KaiserTom Kaiser is associate editor of Franchise Times. He can be reached at 612.767.3209, or send story ideas to tkaiser@franchisetimes.com.
 
Beth EwenBeth Ewen is editor-in-chief of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is staff writer at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonLaura Michaels is managing editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
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Nancy WeingartnerNancy Weingartner is editor-at-large of Franchise Times magazine and the editor of the Food On Demand media project. You can reach her at 612-767-3200 or at nancyw@franchisetimes.com.
Follow her on Twitter at http://twitter.com/nanweingartner.
 

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