Mark Siebert, CEO of the well-known franchising consulting firm iFranchise Group, authored a very interesting article in a recent issue of Franchise Times magazine about “influencers” in franchise sales. As a corporate and regulatory transactional franchise attorney, I represent both franchisors (in the sale) and franchisees, multi-unit owners and area developers (in the purchase) of franchise units. Helping a start-up franchise system navigate the sale of one of its first units is exciting as is providing the legal guidance to a prospective franchisee in deciding whether to decide a franchise unit.
I can educate a franchisee on the legal implications on signing on the dotted line and provide best practices to a franchisor on the offer and sale of a franchise unit in compliance with the FTC Rule and state law. However, as Siebert explains, franchise systems must be aware of the local “influencers” that drive the sale – that is the spouses, family members, business advisors, friends, bankers/lenders and accountants that drive the sale. This is where Siebert recommends that franchise systems involve these influencers in the evaluation process to ensure that a sale doesn’t get derailed. According to Siebert “educate them on the offer. Involve them in the conversation. Invite their objections and explore their fears and concerns. Get them on the phone, share your marketing materials, invite them to discovery day. By involving them in the process, you communicate their importance to you and demonstrate your commitment to transparency.”
To “win” over the business influencers, Siebert recommends having accurate and complete financial performance representations in Item 19 of the franchise disclosure document and providing third-party validation necessary to make the influencers comfortable with the offering. I echo Siebert’s advice. I recommend to all of my franchise clients that they have strong Item 19 FPRs and solid relationships with their franchisees to ensure positive word of mouth. I can provide the best and most comprehensive analysis of the legal terms of the franchise and other agreements and point out red flags and cautionary items in the FDD, but only current franchisees will be able to provide the needed first-hand validation and knowledgeable about the brand and its culture. Often that is just as important to a prospect when making a decision. To read the entire article click here.