Many franchisors are well advised to watch your competition like a hawk, especially if you are a fast-mover entrepreneurial type franchise. So often the competition in an industry, which is typically non-franchised field will be quite concerned when a franchise system comes into the industry and starts it rapid expansion roll-out. How do I know this? Well, lets just say I have experience in such things. Industry associations, good ole boy networks and corporations with many outlets and good market share numbers will be watching. When you get tough in their markets they will cheat, call in favors from government regulators and wiggle their way into your game via lawyers, litigation and government intervention and disruption. Indeed from an abstract point, really government doesnt do anything very well, but government is a great tool to attack your competition with and your competition will use them to attack you. You see in government regulatory bodies there are two types of bureaucrats those who are corrupt and those who are totally inept. The corrupt ones want a job in the private sector and do favors now to participate in the revolving door game and the inept ones are mislead into thinking they are helping the consumer or public when they are being led astray by competitors. Franchisors need to know who their franchisees are and make sure one of their competitors is not hiding behind a dummy corporation to get their proprietary information. In our company we had several attempts by competitors to buy into our business model and I instituted some modifications to our franchise agreement to prevent this. Here is one clause I came up with to catch the competitors trying to by our franchises, which came at the end of the franchise agreement, if they lied on this there would be civil and criminal remedies for us; 7.26 Additional Representations Franchise makes the following additional warranties and representations: (a) Franchisee is a (check one): ___Partnership ___Corporation ___Limited Liability Company ___Sole Proprietorship (b) If Franchisee is a corporation, limited liability company or partnership, Franchisee must attach your complete articles of incorporation, articles of organization or partnership documents and indicate below the name and address of, and percentage interest owned by, each shareholder, member or partner: NAME ADDRESS PERCENTAGE (c) The address where your records are maintained is: (d) The name and address of your designated agent to receive notice are: Franchisee will not substitute a new designated agent without prior written notice to Franchisor. (e) The name and address of your manager are: ----- ------ -------- If you run a franchise company you may wish to consider how you are going to deal with the liars and cheaters of the world who cannot compete on their own merits and are inherently weakest of breed and generally poor excuses for human beings. Such inferior folks are out there and they will do anything to take the lazy way out rather than working to deliver superior service, quality and fair pricing to the customer and working to streamline their business models to maximize profits. Personally I feel sorry for such folks, but that does not mean I will allow them to get the upper hand. Trust but verify, which is my advice to you and how you do that is entirely your decision. So, consider all this in 2006. |
