Inside the Minds: Managing Legal Issues in Franchising2013 – Articles Aspatore Books
Lessons for Franchisors and Franchisees in Avoiding Conflicts and Running a Successful Franchise
During the recent recession, I saw opposing forces influencing the franchise industry. Because of the credit crunch, some franchise systems lowered their standards for admitting franchises into their system, especially early stage franchised businesses that were sometimes too eager to accept franchisees that did not have strong creditworthiness or did not have the ability to support their business. Some of these new franchisees may have had the money to pay a franchise fee, build out a store and buy initial inventory, but ultimately, they did not have enough working capital to survive through the first year, when a franchise can be at great risk of being cash flow negative until it can build its customer base. Unfortunately, the availability of credit for franchise funding was quite limited during this period with new franchisees often rolling money over from their retirement funds to start their business.
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