More Distress Ahead for Franchisees, Attorney Says
“You could sell tickets to these things, there’s so much drama to them,” says Andy Selden, franchise attorney at Briggs & Morgan in Minneapolis.
He’s talking about bankruptcy cases, in an interview for an in-depth article that will publish February 1 in Franchise Times. Then he expands the discussion to financial distress of all kinds, and the desperate measures people take to salvage something—anything—when their company goes bad.
They do so at a staggeringly high rate, reaching a peak in 2009 when Dun & Bradstreet pegged business failures at 90,000. Selden says he expects more to come.
“We’ve just come out of a period of massive, massive closures in this country. And for every one that closed, how many are hanging on by a thread?” He says he hears from franchisees regularly who are barely getting by. “They’re scared to death of the next cycle of mandatory reinvestment,” when franchisees are contractually bound to renovate their facilities.
Wendy’s, he says, tops all of the announced renovation mandates, with an announced “big redo that will cost three-quarters of a million dollars per unit. I about fell over laughing,” Selden says, when he read that audacious amount.
“It’s a mess either way,” Selden says, when franchisees or franchisors stumble financially. But there are ways to catch warning signs early, work out deals before heading to court, and match the right person to the right franchise in the first place. Watch for more in the Continental Franchise Review column February 1.