Franchise Developer: Development Damage Control
December 1, 2006
 When a new Dunkin’ Donuts franchisee fell behind his development schedule, he brought in an experienced partner who helped negotiate a one-year extension. |
Falling behind in a development schedule is a common issue faced by multiunit franchisees and area developers, says Carl E. Zwisler, a franchise attorney with Washington, D.C.-based Haynes and Boone and a former general counsel for the International Franchise Association. The repercussions can include reduced territory, losing exclusivity, penalty fees and loss of further development rights. Should you find yourself in this situation, here are Zwisler’s tips for minimizing the damage.
• Don’t wait. Contact the franchisor as soon as it becomes obvious that you’re not going to be able to meet the schedule. “Approach the franchisor early so they understand what’s going on,” says Zwisler. Start with a phone call, then meet in person to present a written plan with your proposed terms.
• Get everything on the table. If there are other problems beyond scheduling, such as operational issues, now is the time to discuss them. “Get all the issues all on the table at the same time,” says Zwisler. “Don’t spend a month or two renegotiating the development schedule, and then two weeks later say, ‘Oh, I thought of something else.’”
• Keep your territory together. “It makes sense from an economic perspective to keep the area you’ve developed as one entity,” says Zwisler. If the franchisor insists that you shrink the territory, negotiate to lose a remote area.
• Bring in an experienced partner. Zwisler points to one recent example: When a new Dunkin’ Donuts franchisee in upstate New York fell behind his development schedule and was on the brink of being shut down, the franchisee partnered with George Zografos, chief executive officer of Z Donut Co. in South Yarmouth, Mass. Zografos has 20 years experience with Dunkin’ Donuts as a franchisee, and those relationships paid off. “I talked to the people and got him an extra year,” says Zografos. “We met the schedule and opened the second unit on time.”