How long is the term of a franchise agreement, and what happens at the end of the term?
Tom: So, a typical franchise agreement is 10 years, for more on the retail side. On some service branch, they’re five years. There’s always a renewal provision that’s built in there. Sometimes, you have to pay a renewal fee. That actually is one of the items that we negotiate, because, you know, the current salesperson’s not compensated on a deal happening 10 years from now. In certain states, I mentioned state law, for instance, in New Jersey, you have an automatic right to renew.
So, for the most part, if you’re successful and your business is going well, you’re gonna be able to renew that franchise, and those clauses, and what you need to do, is gonna be built right into the FTD and the franchise agreement. So, it’s a great question and something we’re gonna approach because obviously, as we mentioned, this is a long-term thing. So, hopefully, that answers the question.
There is an automatic right to renew in most franchise agreements. If there’s not one, we’re gonna put it in.
What are some of the negotiable points with the franchise agreement?
Tom: Well, it’s gonna vary from, you know, system to system. I think things like that, when we talk about renewal fees, and if sometimes, they’re too high or the markets too high or how long they are, I think the other things that are going to be negotiable…sometimes, territory is something that I think you can get in an emerging brand a little bit more. Some of the language around the fall, I think the escrow issue is an important one for the E2 visa, but typically, you’re not going to be horse-trading over franchise fees because they’re gonna need universal charges.
You know, royalties are gonna be the same. I would beware of any franchise that affects or changes the royalties. So, it’s really gonna be at the fringes, and some of it is gonna be more legal, tactical questions, like, oh, this means this. If this happens, maybe we can clarify that language. So it’s less substance at business points, and more legal points that are negotiable.
Okay, and what are the most common franchise sectors for foreigners that have worked with your firm (Industries or sectors)?
Tom: You know, I think a lot of service brands…but sometimes, the service brands, the sort of man-in-a-van, sometimes doesn’t have the investment requirement. I think food service can be really good. You know, I think it is the same analysis that a domestic person would go through. I think what’s really conducive is that it’s a match.
You know, there are thousands of franchise opportunities out there, probably a few hundred in visa franchises inventory. I’m asked this question all the time, both from farm people coming in, “What franchise should I buy for my uncle?” Or I go to a family reunion, or my college reunion, “Oh, you’re in franchising, what’s the best one?” The best franchise is the one that fits your personality. You have to think as a…what have you done in your life, are you good at sales, are you good at operations, are you a neat freak, are you just, you know, do you love getting out into the community?
Recognize maybe you have that language barrier, and then try to fit the franchise around that. So I think it’s very specific to the human being and less specific to maybe, you know, people coming in. I’ve seen people been successful in all kinds of brands, coming in on an immigration visa.
Does your firm have foreign language capabilities?
Tom: Just Spanish and Portuguese right now.
