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We are mindful that many franchise companies are in need of new concepts to add to franchise programs that have become mature. These may be things that their present franchisees can add to their existing businesses, new concepts that their existing franchisees might like first crack at, and new concepts that could become new franchise systems in themselves.
We will accept assignments to link you to new concepts and to bring your concept to a competent franchise developer.
If you are a new concept source, we will work with you on a contingent fee agreement and be paid when someone adopts your concept.
If you are a franchisor looking for a new concept, we will negotiate a compensation arrangement with you that may include partial contingency components, depending upon whether there is additional legal work you wish us to do in connection with the project assignment. We will also agree to protect your privacy and keep the project confidential until you decide to allow contact with the concept originator.
People with potential new concepts are invited to contact us confidentially. We will provide you with a confidentiality agreement that spells out what you will permit us to do with your ideas, the risks involved and the compensation formula. If you are satisfied with the terms of that agreement, you may then, and only then, disclose your concept to us.
Do not give us any information you wish to remain confidential until there is a signed confidentiality agreement. Information gratuitously submitted without a confidentiality agreement being signed will be treated as unprotected, and you may well lose any rights to it.
New or fresh concepts abound. The world is a garden of rich inventiveness, much of it exploitable. Most of it never sees the light of day, not necessarily because it is not inherently worthwhile in its potentialities, but because it is presented for consideration with insufficient foundational preparation.
If you have a new or fresh idea to present, we are certainly happy to consider it and to try to help you with it if we can. There are gradations of submissibility. The lowest and most difficult is the concept that has never been executed, not even in prototype format. For example, people come with food concepts who have never prepared the components of their creation, not even in their own kitchen, for their own tasting. There is little that can be done with a concept that is at such an early stage. Someone has to test it. Either its creator will do so or someone must be hired to do so. Someone has to take a picture of it. Someone has to prepare some kind of written statement of its purpose, its manner of production, its suggested manner of presentation. That is just for openers. Someone will contact us with a business concept, but they have never researched it to see whether anyone else is already doing it or something like it. They have no idea of a business plan or marketing plan for it. That's ok, because we can help them to do those things, so long as they recognize that they are going to be given a lot of homework assignments.
But the important thing to understand is that, in order for some potential buyer, joint venture, licensee, investor to have serious interest in your concept, it must come with some packaging. It is most helpful if that packaging comes to us from you, even if it is in its crudest, most rudimentary form. When you have signed off on the confidentiality agreement with us and are ready to visit about your concept with some sense of comfort, we need information from and about you. Let us know who you are. Not just your name and address, but also, what is your background in work and professionally, your experience? How is this concept related to what you have been trained to do? How did the concept come to you? Was it an offshoot of something you did at your place of employment?
When you come to the description of your concept or product, please be very specific. What does it do? How does it work? Who do you think might buy it at retail? What would they use it for? If it is an idea about something that is not entirely new, but for which you bring something potentially valuable for a possible partnering link to any company, please tell us what you can do for them in great specificity and whether and to what extent you have already done this for others.
Many of you do not have a deep pocket of wealth to draw upon to develop your concept presentations in a manner to make it obviously desirable. You can help us to overcome that problem by doing as much as you can to inform us of its and your particulars. But please don't tell us that your concept is going to make millions, or that it will revolutionize anything, or make grandiose generalizations about how big some market is in which your idea could be a small part. Let us get to the generalizations and the salesmanship after we have done the qualitative analysis to identify focused opportunities. Investors are very cynical about all the bragging that they see in business plans, and no one believes the numbers in any business plan.
What we want to avoid is a situation in which your idea is presented much like an employee slipping something in a company's suggestion box. No company ever pays meaningful compensation for what gets dropped in its suggestion box. In short, we need to do more than simply to say 'Hey, I have a great idea. Give me money.'
I hope this gives you a better idea of what we want and need to try to help you present your new and fresh idea in a commercially meaningful format. We know you haven't got it in a complete and concise presentation statement yet, but do the best you can. And, whatever you do, do not speak of your concept at cocktail parties and social affairs. It will be lost. Do not share your information with anyone who will not first sign a formal agreement in which they are bound not to disclose the information to others without your consent and not to use it themselves without your consent.
DATED: AS OF
You have come to us for assistance in connection with the development of a new business concept. It is expected that your confidential information will be disclosed to us in the course of our dealing with this project. You consider your confidential information to be of substantial potential value, which could be impaired or lost if disclosed to others or used by us in any manner to which you do not consent. Accordingly, you and we agree to protection protocols with respect to your confidential information upon the following terms:
1. We are acting as advisors and as attorneys in this matter and, as such, are bound by the Texas Canons of Professional Responsibility to keep client confidences confidential, and not to disclose them to any third party without the client's consent. We will act in accordance with this mandate in dealing with your confidential information.
2. You will identify that information which is confidential, as opposed to that which is general communication, so that we know what it is that you consider to be the essence of your secret material which needs special protection.
3. We will not disclose your identified confidential information to any third party without first identifying the party, stating the intended purpose of the disclosure, obtaining the third party's written agreement to protection and use limitations satisfactory to yourself, and obtaining your signature upon a written document expressing your consent.
4. This agreement does not apply to information which is already known to us, information which is already in the public domain, or information which comes into the public domain which was previously secret or confidential.
5. This agreement does not obligate this firm to perform any actual legal or other work for you unless and until there is a formal, executed retention agreement between us, in which the work to be performed is stated and the basis of compensation for such work is also provided for.
6. I agree to be bound by this communication by sending it to you. Your acceptance can be communicated to me by sending it back by e-mail with your statement below saying that it is accepted by yourself.
ACCEPTED AND AGREED TO: THE RICHARD A. SOLOMON LAW FIRM
___________________________________
CLIENT'S NAME
BUSINESS REPLICATION MUST NOW BE MENUABLE
For over forty years the franchising industry thought in terms of a core business concept. It was hamburgers, transmission repair, Hickory Farms Stores, fried chicken, pizza and so on. It is still that way today. But it cannot remain so and continue as a viable investment vehicle for people looking to go into a small business. No matter what one says in a franchise contract, the contract does not drive the business. A franchisee can always leave. Yes, they can leave in year three on a ten year agreement. There is a cost, but the exit cost is less than remaining with a stale franchise concept. They don't have to pay all the royalties for the unexpired term of the agreement. Damages are, at best, far less than that. And if most decide to leave, there may be no exit cost at all with the right planning. A covenant not to compete is worthless if the business is being undermined by competition or by evolutionary changes which are not effectively responded to by the franchisor.
We no longer have the luxury to think of ourselves in terms by which we self defined only a few years ago. We cannot afford to think of ourselves as printers, hamburger stores, household maintenance people, specialty gift franchises, brake or muffler or transmission shops. If we persist in such thinking, we will not attract investment that now insists upon our being sufficiently mobile to cope with the rate of market changes. Why is that?
What has happened in the last ten years is the democratization of technology, of finance and of information. We have become globalized and digitalized. This means that everyone can get into everyone else's business almost at will. Banks are now buying up insurance companies. Computer hardware manufacturers are now in the business problem solving business, much to the surprise of the consultants like the Arthur Andersens of the world who thought they were the ones doing that. Bookstores couldn't afford to open their doors if they sold books. Now they sell information in all its formats, hardcopy and compact disks and on the internet through simple downloads. There are no more Berlin Walls protecting eastern Europe from democracy, and there are almost no more barriers to anyone's entry into your business, or barring your entry into their business.
The refocusing required to survive in this world, whose configuration ten years from now no one could possibly predict, compels us to acknowledge that our 'last' is no longer just shoe repair. It is the operation of business replication systems that include franchising as only one of several business replication methods. And it is the operation of business systems which must be able to accommodate themselves to operate in any unfamiliar business mode which presents itself as potentially profitable. No longer can anyone afford to think of his company as a company founded by me/us, a company that does what I/we have experience in doing, a company that has an establishment patina because it is doing what it has been doing for many, many years.
Capital, even small investor capital, no longer thinks of any investment vehicle as a five or ten year commitment. Capital will stay with an investment only so long as the investment vehicle self refreshes through diversification at the speed of the market. And, what the global, digitized market is teaching the people who are thinking in these terms, is that contracts cannot drive a business relationship that does not regularly, willingly and frequently self refresh. No single concept of business can be said to have a reliable five or ten year life cycle if it never within that period enables its operators to expand and diversify. Franchise support is no longer telling people how to solve their daily operating problems in a single business context. Franchise support is now, whether we like it or not, showing people how the investment they made in us can hybridize, diversify, combine and expand to keep pace with what none of us could have foreseen ten years ago. Indeed, ten years ago there were only about fifty pages on the entire internet. Today there are millions.
A properly and competently counseled franchise investor today has no where to put his money, because the franchising industry has yet to realize and accept this truth. Franchise expansion today is mainly in other countries, not here in the USA. Today approximately 80 % of new franchisor companies are failing for want of 'menu diversification capability'. Old line franchise opportunities are not being bought by anyone other than existing franchisees in the same system who are bottom feeding, buying other franchises in the same system for pennies on the dollar. The business of franchising is franchising, franchising anything, fit or no fit. There has to be movement to new opportunities within any single franchise offering, because the rate of change is now exponentialized compared to even five years ago. If something is potentially profitable, it can be put into any franchisor operation with the hiring of the right people. That its profit potential may be short lived is inconsequential, because no concept has a ten year life expectancy anymore.
New concepts are a market in and of themselves, and every franchisor ought to be out there scouring the new concepts fields for anything that has potential. With this teaming up of concept and proven execution ability, franchising can be reborn. Right now, without that, it is languishing.
Copyright 1997 - 2010 || Richard A. Solomon
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