SafetyQuip franchise renewal rights
Franchisor Gary Shearer says that capital gain is integral to the attractiveness of a SafetyQuip business and so he cannot expect franchisees to wear the possibility, however remote, of non-renewal after the initial five year term, or the subsequent five years. He says franchisees should be given the opportunity to amortise startup and development costs over ten years or more without the threat of non-renewal.
Already the SafetyQuip agreement provides for resale that resets the entire 5+5+5 arrangement, so that franchisees can choose their point of exit without having to compromise sale price, based on how much of the current term remains. Obviously the re-set is likely to attract far better resale than remaining term.
"I think this has come as a surprise to the fellow franchisors I have spoken to," says Gary, "I pick up a sense of disbelief that I am 'giving away' a right that I do not have to give away, given that no one else we know of in the sector has done it."
"But you also see criticism around of flat fee structures, exclusive supply and so on, yet the franchisors involved will argue until cows come home that their structure of choice is the only one that's fair to all parties given the nature of their individual businesses. I am certain that some are right eg George Yammouni's Bathroom-Werx (exclusive supply) and The Touchup Guys (flat fee)."
"It also so happens that SafetyQuip franchisees do not make a fortune over the first couple of years but stand to do very well over the medium term and exceptionally well longterm, and we have decided to take account of this."
SafetyQuip's nine existing franchisees have been granted the same privilege retroactively (to their delight) and according to Gary, current franchise applicants take the point.
"You speak to franchise development people around the place and they tell you that exit is not an issue for most franchisees entering an agreement. It's the last thing on their minds. However as we all know, transparency is a big issue in this sector. What seems to be a clear understanding and not a problem now, can easily become muddled in terms of who said what and turn into resentment tomorrow."
"We just don't want anyone saying 'hang on a moment' when they are active franchisees. And as a royalty based system, naturally we want them heavily focused on growth. Any psychological barrier we can pull out of the way of that growth is a plus."
Shearer argues that anyone who gets through the selection process and follows the system to the letter has every opportunity to succeed. In the case of a mistake on both parties' parts, then it is pure economic sense to part company in the most productive way possible.
23.07.2007
FCA Member
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