Published in the Union Leader (3/28/2016)
Q. I have saved up a good amount of money working in the hospitality field and believe I have what it takes to successfully run a franchised restaurant. There are so many concepts that I think could do well in my geographic area – some big names, but many I’ve never heard of. Is having a more recognized name really worth the investment?
A. Congratulations and best of luck in your venture. As you likely already know, franchising is a method of expanding a business and distributing goods through a relationship between an entity that has an established brand and system (the franchisor) and an independent business owner (the franchisee). In exchange for a fee or payment, the franchisee gets a license to operate his or her business under the strict control of (and with assistance from) the franchisor, who holds the federally registered trademark.
One of the primary elements of a franchise is the use of an established brand. The brand along with a tested system provide the franchisee with a jump start on a customer base thereby improving their chances of success.
Of particular importance is the strength of the brand. The fundamental characteristics of a strong franchise brand are consistency of the product or services across the system and the strength of the association a consumer makes with a particular logo or color scheme. The franchisor not only works to develop the brand on a national and sometimes regional level but also provides assistance to the franchise locally.
In some cases when a new franchise moves into a particular region, the brand may not be very well established, thus putting a prospective franchisee at an immediate disadvantage. The franchisee becomes a pioneer and has to rely heavily its own efforts to establish a foothold in the region.
If the franchisor is committed to developing a brand in a region it will work with its franchisees and invest in their efforts to grow the brand. If the franchisor is not completely committed to brand development this case, a franchisee tends to struggle.
A well-recognized national brand can often help mitigate this risk. For example, take the recent announcement by Dairy Queen of their move to open a significant number of new stores in Massachusetts. While the presence of this brand is not as well established in New England as, say, Dunkin Donuts, the fact that the brand is strong will be a tremendous boost for new franchisees.
As with any business opportunity, you’ll want to diligently review all aspects of the various franchises you are considering. If need be, continue to seek advice from professionals experienced in this area so you fully understand what to expect, and can make well-informed decisions.
Eric Sigman can be reached at [email protected].
Know the Law is a bi-weekly column sponsored by McLane Middleton, Professional Association. We invite your questions of business law. Questions and ideas for future columns should be addressed to: McLane Middleton, 900 Elm Street, Manchester, NH 03101 or emailed to [email protected]. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.