Christopher Egan, counsel for Dunkin Brands, Inc. had some very interesting comments during the program he presented at this year’s ABA Forum on Franchising Annual Meeting in Seattle, Washington about the different expectations franchisees operating in alternative or non-traditional venues such as airports, stadiums, amusement parks or grocery stores have of franchisors.
A franchisor can generally expect a franchisee entering into an alternative venue to likely have a different and stronger bargaining power. Usually there are connections to the venue that the franchisee holds which have allowed the franchisee to enter the venue and provides the franchisee with much greater leverage than the typical franchisee. These franchisees expect that brands will accommodate their demands. For example, he mentioned that these franchisees may request, and expect, that the brand modify its signs, layouts and equipment requires to meet the needs of the alternative venue space. Mr. Egan explained that Dunkin maintains different portfolios of requirements, layouts and standards for each type of alternative venue the brand operates. Finally, many franchisees in these alternative venues expect lower fees whether initial fees, royalty fees and/or advertising fees to account for the fact that it is operating in an alternative venue where customers and hours of operation may be limited.
It was interesting to hear Mr. Egan speak about how Dunkin addresses unique franchisee demands in alternative venue arrangements. Of course, these issues can also find their way into more traditional locations as well due to creeping zoning ordinances or local sign regulations. The Takeaway? It is important for a franchisor to understand that its traditional model may not always work and it must be flexible with franchisees if it wants to be successful operating in alternative and non-traditional venues.