The below is a post from FBA Member, Andy Lamedman.  Andy joined the FBA in June of 2010 and has stood out as a true professional who upholds the integrity of the industry.  Thank you Andy for your insight and for sharing your experience.

Networking Pays… Big Commissions!

I have always believed in and heavily touted the power of networking.  And still do… even more so now as you’re about to find out.  For anyone that has ever wondered what the value of networking can mean to them, please continue reading.

Whether you go to a networking breakfast at 7:00 AM, or attend an evening cocktail mixer that starts at 6:30 PM, you’re investing extra time into your work day.  So why do it?  Here’s why:

A few months ago I attended an evening mixer and met a woman networking her business.  We engaged in the obligatory chatter and exchanging of business cards.  As is my custom, I followed up with a “nice to meet you email”, and my personal offer to learn more about her business in an effort to pass some referrals her way (I always start by giving).  I then put her name on my monthly “drip system” distribution list to begin sending her my newsletters and other e-blasts.

One day, out of the blue, I received a call from her saying; “Hi, remember me?”  Well, of course I do.  She indicated she would like to learn more about what I do, and how I could possibly help her find the business of her dreams. Unfortunately, she hastened to say, that she did not have the requisite finances to invest in such a venture.  However, she did say; she has a friend who might be interested in partnering with her as a financial investor to her “sweat equity” investment.  And so we began the process…

Fast forward now to the close.  We ultimately inked a deal where they are partnered in a Junk King franchise in Los Angeles, CA.  And, I received a commission approaching $30,000 at first blush, with much more to come on the back end based on the structure of the deal.

Junk King had wide open territory in Los Angeles County.  They sell their territories in blocks of 500,000 population sectors.  My clients purchased four-blocks totaling Two Million population.  We also negotiated the Right of First Refusal for the balance of Los Angeles County and the neighboring community Southeast of L.A. County known as the Inland Empire.  As they exercise that right and purchase additional territories, the Franchisor will continue to pay me my broker fee referral commissions (yes, we have this in writing).

Additionally, my networking pal (now client and friend) subsequently referred me to her neighbor who is about to be laid off from corporate America and receive a sizable severance package.  He too, is now looking to secure his future and we are taking him down the path to freedom, et cetera.

So, the moral to my story:  Networking Pays… Big Commissions! I met someone that had interest but no money.  She introduced me to someone with money.  They formed a partnership and closed a deal that paid me a sizable commission, with additional commissions yet to come as they develop their business.  Additionally, she introduced me to yet another lead that has potential to earn me more money yet again.  All of this from someone that I did not pay a nickel for in terms of “lead cost”.  This was a free lead… just from attending a networking event.

Further appreciation for closing this Junk King deal goes out to:

• Dennis Mulgannon, Franchise Development Director / Jung King:  Dennis is the consummate professional and was extremely easy to work with.  He’s efficient and very accommodating to both the client and broker requests.  Simply a joy to do business with.

• Tom Mc Donald, President / IRA Rollover Solutions: Within 45-minutes of the initial introductory call with my clients, Tom outlined his services and fees, took the application and credit card number from my client and was on his way to expediting the filing of  Articles of Incorporation with the State of California.  He also set up a 401(k) plan in the name of the new corporation for the client’s new business, secured a third party administrator for the 401(k) plan, and obtained the Federal Tax I.D. numbers, for both the Corporation as well as the new 401(k) plan.  Additionally, he handled all paperwork related to rollover funds making it easy and seamless for my client to gain access to his funds required to wire transfer to the Franchisor in a timely fashion.  Not only was Tom knowledgeable, efficient and effective, he pays a broker referral fee of $1,500, which is 50% higher than his competitors.

• Eric Riess, Legal Expert Extraordinaire / Greesnfelder, Hemker, & Gale, P.C.: Talk about a Master Class.  Eric provided the one-hour of free legal counsel we offer and within the first 30-minutes alone had fully educated my clients.  He answered their FDD questions, reviewed their Addendums to the FDD that had already been verbally negotiated with the Franchisor, and guided them on how best to structure their Joint Venture Partnership Agreement between the two of them.  

At the end of the day, all parties worked exceptionally well and in concert for the good of the ultimate result… putting a client in business!

Congratulations, Andy!

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Discussing Franchise Territory Changes and Approving Agreement Modifications

I had my client come into the office to discuss the territory changes.  It seems his daughter had spoken with him as well and indicated that there were some bad areas in the territory he wanted to be in.  This was excellent because it was a consistent message to what I was telling him.  When we spoke I showed him the territory on the map and the extra areas I had carved out and requested from the Franchisor.  He agreed that the territory was great.  After all, we had negotiated a territory that was almost double of the size of what an average territory consists of with this franchise.  That meant my client has double the opportunity to make a great living with this franchise and that is what I aim for, giving the biggest advantage to my client up front while still being fair.

The attorney, Eric Riess, sent the modifications to the Franchise Agreement directly to the Service Team of Professionals.  Because the FDD was so fairly written, there were only a few things that he requested.  When the Franchisor received it, he said that everything Eric asked for was fair and that they would agree to our terms.  An addendum was created and added to the agreement.  By using our franchise consulting team, we got the client a bigger territory, a better royalty, an easy exit clause and extra protections in the case of business challenges.  It was a win for all parties and we were very excited to see the willingness of the Franchisor to help our client succeed.

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Call with the Franchise Attorney

Our franchise attorney, Eric Riess, reviewed the Service Team of Professional’s FDD and found it to be a fair document and a good representation of the company.  He encouraged my client and I to do proper due diligence and gave suggestions on extra questions to ask the Franchisees.   Eric went through each of the items that he was going to ask the Franchisor for.  He explained why he requested them and was sure to check for understanding along the way.  The call went well and at the end Eric let us know he would be negotiating the terms directly with the Franchisor.

It’s incredibly important to have a knowledgeable franchise attorney that can review the FDD and make it work for both the Franchisor and my client.  Reviewing and revising the FDD should facilitate the investment in the franchise, not hinder it.

We called the Franchisor afterward and talked to him about any additional questions that we had.  We let him know that our attorney was sending the memorandum with the requested changes to him and asked that he review it.  One of the items on the memo was that the territory had not been defined yet.  Next, we would began discussing territory.

Follow Up to the Call with the Franchisor

After getting off the call with the Franchisor, my client and I scheduled a next meeting to call Franchisees together.   The FDD was sent to both my client and myself.   We began reviewing the website and materials that the franchise provided.  The Franchisor overnighted the FDD (Franchise Disclosure Document) so that we would have it before our next meeting which was just a couple days away.

We received the FDD in perfect timing.  We immediately signed and sent back the receipt; we do this so that the franchise can stay compliant.   Franchises are required by the FTC to have a signed acknowledgment or “receipt” that identifies when the prospective Franchisee received the FDD.  The receipt must be sent back to the franchise and held for a minimum of 14 days before the prospective franchise buyer is even allowed to purchase the franchise.  The FTC does this to ensure the prospective Franchisee is given enough time to do their proper due diligence before making this life changing purchase.  From what you learned earlier in this case, you understand that all franchises are not created equal and some have a much higher chance of success than others.  Good Franchise Consultants can help you identify the difference.

Once received, I read the FDD and highlighted any areas of caution that I saw and wanted to bring up to the Franchisor and our franchise attorney.  This process only took me a few hours because I am skilled at reading FDDs and have been properly trained on what to look for in the FDD.  As a Consultant I do not give legal advice, our attorneys do that, however I do have the responsibility to protect my client and I intend to do that.   After reading the entensive document I was prepared for the next meeting with the client.

Learn more about using a Franchise Broker here.

Learn more about becoming a Franchise Broker here.

Becoming a Trusted Advisor

The second lead that my referral source (who we met in the first post in this series) sent me came into my office to meet me.  He and his wife had traveled a long way and were vacationing nearby.  Before we met in person, they sent me an e-mail with information on a franchise they were interested in.  It was a franchise that was not in the Franchise Brokers Association’s Approved Franchise list.

They sent me the FDD of the franchise.  That was all I needed; I began my research and read the FDD (a 200+ page document that is governed by the FTC, also known as a Franchise Disclosure Document).  I used the one hour of complimentary legal services that our attorneys at the FBA provide all members’ clients.

In reviewing the information, we found out that the Franchisor’s name was not a valid trademark and in fact the trade name was owned by another company.  This meant that any Franchisee that was in that system was operating under a name that violated U.S. Patent and Trademark Law.  That could be detrimental to my client’s business.

Can you imagine buying a franchise for the brand name recognition then, after 7 years in the business, you are sued for operating under the name you bought from the franchise?  Then you would be forced to change the name of your business and pay for all re-signage, penalties and other fees.  What a mess that would put you in!

That’s not all.  In doing the research we found that 35% of all Franchisees in the system had failed. That meant that my client had a 1 in 3 chance of not succeeding. Yes, a large part of the Franchisee’s success is their work effort and determination, however we need to make sure that the Franchisor knows exactly what to do to help willing Franchisees.

Next we found out that every Franchisee in the system was operating differently.  They were not “following the system” as the Franchisor explained.  The problem with that is that it is the Franchisor’s job to:

1) Make sure the system works

and

2) Make sure Franchisees are doing their best to stay on track with the system

The fact that all of the Franchisees were operating differently told us that the system wasn’t a system at all.

We also found out that this Franchisor had hundreds of franchise concepts under their belt.  They were a company that simply sold franchises and didn’t necessarily have the experience of operating the types of businesses they were selling.  After uncovering all of these things, we decided that the risk was far too great to go with this system.  The franchise was by no means a bad franchise, it simply too risky for this client.

As the client walked in, I was prepared with this information.  As you can see, very quickly they realized the importance of using a good franchise consultant.  They were relieved and were ready to find something that was a better fit for their risk tolerance and financial goals.

Learn more about using a Franchise Broker here.

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Franchise Brokers Association to Host
Local Franchise Investors Roundtable & Workshop

Roundtable Scheduled to Increase Jobs and
Promote Business Opportunities in Local Economy

Ft. Lauderdale, Fla. – August 11, 2010 –On Thursday, September 9, 2010 from 2:00 p.m. to 4:30 p.m. the Franchise Brokers Association (FBA) will be hosting a Franchise Investors Roundtable & Workshop.  The event is organized to educate attendees on entrepreneurship, provide tools for wise investing and improve local economic and business development. The roundtable targets individuals interested in learning about franchise and business opportunities, options available for business investment and how to begin the qualification process.  Workshop co-sponsors include The Greater Fort Lauderdale Chamber of Commerce, and the SUN Business & Support Program.

Franchise Investors Roundtable & Workshop
September 9, 2010
Held at:
The Greater Fort Lauderdale Chamber of Commerce
512 N.E.  3^rd Street
Ft. Lauderdale, FL 33301

Speakers will include members of the FBA’s Board of Directors, each of whom is a successful business owner and has been involved with the franchise industry for many years.

Sabrina Carter, Executive Director and Founder of the FBA, is a long-time, accomplished entrepreneur, franchise consultant and franchisee.  She will be speaking on Franchise Ownership and Business Development.

Carl L. Gould, FBA Board Member, is an internationally renowned entrepreneur, business coach and mentor.  Carl has co-authored with bestselling authors Ken Blanchard & Steven Covey, and has recently published his latest book The 7 Stages of Small Business Success; he will be discussing “Getting  Ready for the Right Opportunity.”

Eric R. Riess, Esq., is an officer of a very successful corporate practice law group in St. Louis, Mo. As a franchise attorney and a certified public accountant, Eric brings considerable business experience to his clients who are looking to purchase a franchise business. He is well-known and a respected leader in the franchise industry; he will discuss “What You Always Wanted to Know About Franchising But Were Too Afraid to Ask A Lawyer to Learn.”

A financial advisor from the greater Ft. Lauderdale area will be in attendance to discuss the financial industry and business financing options.

Cost of the event is $20 at the door; however, those who pre-register for the event on-line at www.franchiseBA.com/Roundtable will receive FREE admission.

There will be opportunities to ask specific questions during the workshops as well as learn about specific franchise opportunities in South Florida.

The job market is full of candidates that have been downsized, laid off, their company has closed, they’re in a career-transitioning period of their life, or they are looking for a new opportunity to be their own boss; this event is designed to answer their questions and encourage entrepreneurial success.

About Franchise Brokers Association

Franchise Brokers Association is an Orlando, FL based trade organization.  The FBA supports all members of the franchise community and can facilitate all steps in the franchise process, from franchise development to unit sale.  FBA was founded in 2008 by franchise consultant Sabrina Carter and has grown to over 550 consultant and franchise members.  The FBA’s purpose is to provide support and improve the industry standards for franchise investment, development and sales.

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Contact

If Eric Riess telling you to use franchise attorney isn’t enough, here’s an Ask Franny column from Blue Mau Mau on why it’s so important.

In this edition, an attorney is writing to ask some advice on representing his friend who is interested in franchising his business.  As Harold Kestenbaum so wisely puts it, “The last think you need to do is learn a complex area like franchise law, on the fly, at the expense of your friend.  I dare say that it would take you years to learn the ‘nuts and bolts’ of franchising.”

If you’re interested in buying a franchise, making your business into a franchise, or if you’re an attorney with a client interested in franchising, make sure to get connected with a reputable franchise attorney that has experience in the field, someone that knows their “nuts and bolts.”

Here’s a video of Eric discussing the goals of a franchise attorney and the benefits of using one.  Enjoy!