Nobody likes lawsuits. They’re expensive, stressful, and detrimental to business. Sometimes litigation is necessary, but many times it is not. What can franchisors do to avoid legal disputes? We asked John Fitzgerald, co-chair of the franchise practice at Gray Plant Mooty, a full service commercial law practice that focuses on franchising. Fitzgerald gave us these tips:

Communication is key. There should be no surprises. Before taking any new action, explain it to the franchisees. Let them know your reasons for doing it and how they will benefit. Sending out an edict saying this is what’s going to happen, “thou shalt now do it,” is what causes people to push back because it’s a surprise to them.

Invite input before making changes. It’s change that causes people to get upset and to start litigating. Before you affect the change, new standard, or new item, get the input of the franchisees. That doesn’t mean it’s a democracy or you’re looking for a consensus. Rather, you want to honestly say that you’ve talked to the franchisees and gotten their input. And it’s not just a ploy either. When you talk to franchisees, you’re likely to get some very good information because they’re living the business. They know what works in the store or unit and what doesn’t work – often better than the experts on your training staff.

Think about why you’re making changes. Whenever making a decision, ask this question: Whose business are we serving? Whatever you’re doing as a franchisor should be working to make the franchisee more successful, driving their business to get more sales which will mean more royalties for you. Remember that litigation comes from unhappy franchisees when they start pointing fingers because they’re not succeeding. For example, you might want to install a great new computer system, but unless it can really help the franchisee’s efficiency and bottom line, is it really worth it? If it’s not going to help move the business forward and you can’t justify it reasonably to the franchisee, you’re asking for disputes. You’re just adding stress to the franchisee by putting in a system with added cost.

Contact info:
John Fitzgerald (612) 632-3064
Gray Plant Mooty www.gpmlaw.com

Should Franchisors and Franchisees Consider Private Equity Partners?

Private equity investors have grown comfortable with the predictable cash flow and exciting growth opportunities in franchising. Today many franchise companies exploring financing alternatives are looking to private equity firms for growth capital, cash for buy-out’s, or liquidity for shareholders and management. Forming an equity partner relationship can have a dramatic impact on the long-term potential of a business. How can you be sure it’s the right choice for you? We asked Glen Kaufman, Managing Director at American Securities, a private equity firm with a consistent track record in the industry. The middle-market firm invests in companies with revenues ranging from $100 million to $1 billion.

Q: What should you expect from the franchise/private equity investor relationship?
Kaufman: You ought to expect a partner who understands your company and its culture, is supportive of the management team and its position, understands how to deliver value without infringing on management’s role, and is oriented towards the long-term successful building of your enterprise. The capital that a firm will bring is necessary, but what you really ought to be focused on are those other elements.

Q: How can you find the right equity partner?
Kaufman: There is no shortage of equity partners. You can seek equity capital directly through your relationships with law firms and accounting firms who will generally know the sources of equity capital. You can also retain an intermediary, a broker, or an investment banking firm that will connect you with potential providers of capital. Your job during the process is to effectively communicate your story and your vision in a candid way so that you ultimately get the right match.

Q: What can you do to make it succeed?
Kaufman: The key to success as in all relationships is picking the right partner that matches your style, culture, and goals. Then nurture the relationship from the earliest stages. Avoid doing negative things like portraying yourself differently than you are, over-promising, or developing an attitude that does not promote constructive dialog such as blocking the other party from the discussion.

Q: When is the right time to begin the process?
Kaufman: People want capital for many reasons. Whatever your reason, the right time to raise capital is before you need it. You never want to be in a situation where you need to do anything in business. You want to act to raise capital when you feel no pressure to have that capital, when the

Contact info:
Glenn Kaufman, Managing Director
American Securities
(212) 476-8029
www.american-securities.com

The Necessity to Revamp Franchise Operating Systems

By: Bob Gappa

When you grant a franchise, one of the most important takeways for the new franchisee is an operating system for the franchise. Every successful company has a well defined operating system. In order for a company to grow and continue that success, the operating system must be followed.

But, once the original operating system is established, it must be refined and tweaked as changes take place in its industry and within the company. An ongoing challenge for every business, not only franchise companies, is how to improve their Operating Systems in order to better Manage Results.

To do this, a company must take a serious look at the current systems, analyze them and then proceed with determining the next steps towards improvement. All companies should have this as part of their ongoing plan, although many do not take the time for this important part of their operation.

A recommended process is as follows:
1. Analyze and identify the Gaps in the current operating systems
2. Prioritize which Gaps need immediate attention
3. Identify strategies and tactics to close the Gaps
4. Establish follow-up processes to ensure progress is being made closing the gaps
5. Train and develop your people with the necessary skills, knowledge & abilities to make their behaviors more effective & sustain performance over time.

Areas in the company that need to be analyzed in order to begin the process are:
1. How customer-centric is your business?
2. How effective are your leaders?
3. How effective is your strategic, operations & financial planning at the corporate, corporate-franchisee and the franchisee level?
4. How does your process of “Selling” and “Granting” franchisees stand-up to “Best Practices” developed by other successful franchise companies?
5. What is the current state of your franchiser/franchisee relationships?
6. What is the role, function & purpose of your field consultants? and, what processes do they use with the franchisees?
7. How effective are your pre-opening and operations manuals?
8. How effective are your new franchisee training programs and your on-going training programs?

Once the company has identified the above areas, the real work begins. It is possible to tackle some of these areas and issues with internal staff. However, the more difficult issues and areas where improvement is needed may well require outside consulting, guidance and assistance. One of the most challenging parts of this process is to be honest as you analyze and identify the Gaps. It should not be perceived as a negative that there are Gaps, but should be looked upon as opportunities to improve your operating systems in order to best manage the results in your franchise system.

To learn more about this topic and others, go to Management 2000’s website at www.mgmt2000.com to see complete list of services and seminars offered on many franchise topics.

Bob Gappa is the founder and President of Management 2000, which was founded 28 years ago and specializes in working with companies that use franchising to grow their business. Bob can be reached at 800-847-5763, via email at m2000@mgmt2000.com or visit website.

Triarc Gets Go-Ahead to Complete Wendy’s Deal

Triarc Cos. Inc.’s attempt to form a two-brand quick-service powerhouse moved forward this month when shareholders of the Arby’s parent and Wendy’s International Inc. separately approved a $2.34 billion merger. Under the deal that was put to a simultaneous vote at the meetings in Atlanta and in Wendy’s headquarters city of Dublin, Ohio, Triarc will proceed to pay 4.25 shares of Class A common stock for each Wendy’s share it does not already own. The buyout is expected to be completed by the end of the month.
Approval of the acquisition by both company’s shareholders had been expected. The deal had earlier been recommended by the board of each party. The company formed through Triarc’s absorption of Wendy’s, operator and franchisor of the nation’s third-largest burger chain, will be known as Wendy’s/Arby’s Group Inc. The new entity will operate 1,169 Arby’s and 1,402 Wendy’s restaurants, while franchisees will operate 2,550 Arby’s and 5,223 Wendy’s. The new company will trade under the stock symbol “WEN” on the New York Stock Exchange. (Nation’s Restaurant News, 9/15/08)

Sports Bars Show Strong Profits in Weak Economy

Hard economic times haven’t weakened the strengths of at least one restaurant sector—casual-dining restaurants with sports bars. Buffalo Wild Wings, Old Chicago, Beef O’Brady’s and Duffy’s Sports Grill are four leading examples of full-service chains that feature sports programming on big-screen TVs and appear able to withstand the nation’s economic downturn. Apparently, America’s sports fans are not giving up their love of cheering their favorite teams or playing their own sports-related games while dining and drinking with groups of friends in genial and lively settings.

The 519-unit Buffalo Wild Wings, which just reported a 46-percent surge in second-quarter profit, was accorded “top dog status” by stock analyst Jeff Farmer of Boston-based Jefferies & Co. on the basis of same-store sales growth of 8.3 percent at its 171 company stores and 4.5 percent at franchised branches. The Minneapolis-based chain is on course to add 75 new restaurants by the end of this year. The chain is also upgrading to high-definition TVs in all restaurants and offers free Wi-Fi. Buffalo Wild Wings promotes itself as being a headquarters for watching football and participating in fantasy football games. The chain additionally has successful ongoing promotions such as Wing Tuesdays, with chicken wings priced between 40 cents and 50 cents each, and Boneless Thursdays, when those wings are discounted to 50 or 60 cents each, depending on the market. (Nation’s Restaurant News, 8/11/08)

Surge in Snack Items at QSRs

With chains like Jack in the Box and Popeyes adding lower-priced snack items to their menus, more and more quick-service operators appear to be counting on the munchies to drive traffic. Jack in the Box's new Pita Snacks and Popeyes' The Big Deals lineup are the latest in a surge of snack-oriented product introductions at major fast-food players since McDonald's popular $1.29 Snack Wrap line debuted in 2006.

Jack in the Box on Monday began the rollout of its Pita Snacks menu. The core lineup includes steak, fish, and grilled or crispy chicken varieties, and each is made with shredded lettuce, shredded cheddar cheese and a smoky chipotle sauce. The suggested price is $1.99 each. The past year has seen a variety of new wrap-like items. Last November, the Quiznos sandwich chain rolled out its line of $2 flat-bread Sammies. This February, KFC challenged McDonald's in ad campaign that pitted the chicken chain's new $1.29 Toasted Wrap against the Snack Wrap. And this spring, Wendy's launched its own version, the Chicken Go Wrap, which is available with grilled, crispy or spicy chicken for $1.49 each. (Nation’s Restaurant News, 8/25/08)

Starwood Aims to Double China Portfolio to 200

American hotelier Starwood Hotels and Resorts Worldwide plans to double its 100-strong hotel portfolio on the mainland of China to 200 in three years despite rising risks associated with the nation's economic transformation, according to a top official. The operator of upmarket hotels such as Sheraton, Westin, W Hotel and St Regis, which clinched its 100th project in July, had adjusted its development strategies by adding more resorts particularly in southern China. On top of 43 Starwood hotels operating largely in coastal and gateway cities such as Beijing and Shanghai, there are 57 under construction in Zhejiang, Jiangsu, Beijing, Shanghai, Chongqing and Guangdong. The group planned to add about 30 projects annually in the next three years after witnessing a faster than expected economic advancement in the past 10 years. (Hotels Magazine, 9/1/08)

Jamba Closes $25M Finance Deal

Jamba Inc. has raised $25 million through a financing deal with Victory Park Capital Advisors LLC, an Illinois investment manager. The financing agreement is for $25 million in two-year senior secured notes. Jamba (NASDAQ: JMBA), which is based in Emeryville, CA and operates the struggling Jamba Juice Co. smoothie chain, is borrowing the funds at a steep cost: LIBOR (or the London Interbank Offered Rate), a widely used interest reference rate by banks lending to each other, plus 8 percent and 12.5 percent, according to a filing with the Securities and Exchange Commission. Steven Berrard, president and CEO of Jamba, said in a statement the previously announced financing will give the company greater flexibility to execute its business plan. In an effort to cut costs, Jamba said in August it would eliminate more than a dozen positions, close about 20 stores and shift its focus to franchising from growing corporate-owned outlets. It is also hoping to boost sales of Jamba smoothies in grocery stores through its licensing deal with Nestle USA. Jamba reported a second-quarter loss of $89.2 million on revenue of $98.6 million.
(East Bay Business Times, 9/12/08)

Burger King Opens 1,000th Restaurant in Latin American and Caribbean Region

Burger King Corp. announced today that it now has 1,000 restaurants open in the Latin America and Caribbean region. Burger King restaurants now operate in 27 countries across these areas and have attained 15 years of positive comparable sales growth. Most recently, the Burger King brand surpassed its closest competitor in Mexico in total number of restaurants making it the region's 17th country to successfully attain market leadership. The region's 1,000th restaurant opening took place in Rio de Janeiro, Brazil, in June 2008 with franchisee Emilio Westermann who has a development agreement to open an additional 30 restaurants in Brazil over the next five years. Much of the Burger King brand's recent restaurant expansion can also be attributed to new market entries in Colombia, Curaçao, Suriname, and Uruguay and the further development of existing markets such as Mexico, Brazil, and the Southern Cone. (QSR Magazine, 8/14/08)