A blog post on the Nation’s Restaurant News site has raised a great question: “Franchisees spend a lot of time and energy, and their own money, investing in a brand. So why aren’t more of them on company boards?”
As NRN’s Jonathan Maze noted, franchisees’ interests are not always the same as franchisors:
“…franchisors make their money from franchisees’ top-line revenues because they take a percentage of those revenues as royalties. Franchisees prefer making a profit. And they prefer simpler operations. Those can go against what a brand might want.”
As we reported, this summer restaurant chain Famous Dave’s added California franchisee Anand Gala to its board. “As more brands move to an all-franchise model they have very little skin in the game,” Gala told NRN recently, explaining the importance of the franchisee perspective. Continue Reading
With no advance notice, Domino’s cut profit-sharing payments to franchisees in September, despite posting strong profits and high stock prices and spending tens of millions on share buybacks and dividends.
Domino’s franchisees who buy all their food from Domino’s supply chain receive profit-sharing checks from the supply chain operation, but the company surprised franchisees with smaller-than-expected payouts at the end of September. Without notice to franchisees, Domino’s decided to charge the supply chain segment a share of the company’s unexpected insurance expenses in the third quarter. The charge apparently resulted in smaller profit sharing checks.
In a letter to its members obtained by Blue Mau Mau, the Domino’s Franchisee Association board criticized Domino’s for failing to alert franchisees to the reduced payments:
…many Franchisees depend on the checks to reinvest in their businesses and/or to help manage their personal finances. While we understand there are Wall Street related regulations surrounding what can be shared about financial performance, we believe there has to be a better way than learning of the negative impact on the day the checks are processed.
Despite sharing less profit with its franchisees,
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The California State Legislature has sent the California Small Business Investment Protection Act to Gov. Jerry Brown, and franchisees are urging the governor to sign it. The Assembly passed the measure 79-0 on Aug. 31 after the State Senate passed the bill 34-0 on August 28.
Noting bipartisan backing for the measure, Senator Hannah-Beth Jackson, D-Santa Barbara, said before the Senate vote that the bill will “help bring balance to the franchisee-franchisor relationship,” adding that it “provides needed protections against unwarranted actions by a franchisor.” Specifically, the bill, AB 525, strengthens protections against termination of franchisees; enhances franchisees’ ability to sell their businesses; and requires franchisor payments to franchisees if they do terminate or refuse to renew franchise agreements.
Overwhelming support for the bill prompted the franchisor lobby, the International Franchise Association, to stop its campaign against AB 525. The Coalition of Franchisee Associations and the IFA issued a joint letter stating that “the bill will further strengthen franchising as an engine for economic opportunity in California.”
Franchisees are signing onto a letter to Gov. Brown urging him to sign the Act. Brown vetoed a franchisee rights bill last year.
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1-800 Flowers franchise owners recently united to form the Independent Florist Franchisee Association (IFFA) to promote the interests of the approximately 150 owner-operators of the 1-800 Flowers system. The group’s mission is “to foster open communications with our Franchisor and find mutually beneficial solutions for growing the franchise group including best practices, profitability strategies and group benefits through unified voice.”
In a release announcing the IFFA’s formation, Association President Judy Sicola, who owns four Houston-area 1-800-Flowers stores said, “We want to be certain that the franchisees have a voice when it comes to properly planning for the continued growth and strength of the 1-800-Flowers brand and we believe that IFFA can be instrumental in helping those efforts.” Continue Reading