UNDERSTANDING UNPROFITABLE UNITS

Scott Kern ran a chain of 420 franchised ice cream shops and understands the problem of unprofitable franchisees. Allan Hillman has been on both sides of the problem of unprofitable franchises, representing both franchisors and franchisees in the difficult situations that arise when units are unprofitable. Helping a franchisor understand the causes of franchisees’ troubles goes far beyond legal expertise and taps our extensive franchise business knowledge. We help clients bring the right resources to bear on the question of why certain franchisees are not profitable.

Sometimes we help franchisors find out what their dealers are doing wrong:

  • Critical analysis of site selection criteria for retail operations
  • Neighborhood demographics
  • Local competition
  • Store level operational problems
  • Theft, waste and portion control
  • Absentee operators

We help franchisors analyze, discover, understand and fix problems with unit level profitability caused by dealers.

Sometimes, however, a franchisor has to look critically at what it may be doing wrong itself:

  • Is the initial investment for fit-up too high?
  • Are operational costs at the store level too high?
  • Is the national advertising program effective?
  • Does training lead to operational excellence?
  • Do struggling franchisees receive strong operational support?
  • Does the franchisor provide effective assistance and good programs for the local marketing?
  • Are the company’s products and services well accepted?
  • Are there regional differences in consumer acceptance of products?

Averting franchisee failure at the earliest stages preserves distribution and avoids litigation. The assistance we provide to clients identifying the causes of poor unit level profits cannot be overstated. Allow the Franchise Law Source to help you design programs to analyze and correct profitability problems at the local store level.

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