The Franchise Manual Podcast

Episode #16 - Is Three-Party Franchising Right for Your System

August 3, 201769 min
In this episode, Brian Schnell and I talk about Three Party Franchising – that’s using master franchisees and area developers to grow your franchise system. Many people misuse these two terms, or use them interchangeably – Brian’s going to clear it all up for us. Time Stamp Brian Schnell Intro    00:00:40 Segment 1                 00:02:28 Get to know Brian Schnell Segment 2                 00:23:53 Topic Segment - Is Three Party Franchising Right for Your System? Segment 3                 01:00:51 Quickdraw Questions   Topics discussed in this episode: What is the difference between a Master Franchisee and an Area Developer What is the Three-Party Franchise model? Three Party Franchise model works very well internationally Avoid the temptation of "0-100 franchisees quick" through three party franchising without a full understanding of what is involved. Don't try to sprint before you know how to walk. The conversation about Three Party Franchising shouldn't take place without a full understanding of risks and benefits to all parties. What is the necessary infrastructure before diving into a three-party franchising model? A full understanding of: Site selection Field support Unit economics The infrastructure must exist somewhere; either on the franchisor side or the area developer side. The functions of managing a franchise system are usually carried out by a team of corporate employees. It is not realistic to expect an area developer to fulfill the same functions plus operate a unit without the proper infrastructure. Finding an area developer that is good at EVERYTHING is not likely. Try focusing on an area developer's core competencies and supporting the area developer in the areas where he/she is weaker. Don't offload functions of managing a system to an area developer that can be more efficiently executed by corporate office. After you sign a master franchisee or an area developer, the system DOES NOT go into autopilot. The franchisor must stay involved and active. Trying to fix problems in the three-party franchise relationship are much easier to correct early on, so stay connected and involved. Educate yourself before trying to utilize a three-party model by talking to attorneys and consultants who have experience. Manage expectations up front through a well written agreement and ops manual     Brian Schnell Faegre Baker Daniels brian.schnell@FaegreBD.com 612-766-7699   Kit Vinson FranMan Inc. (Franchise Manuals) Kit.vinson@franman.net 214-736-3939 x1   Notable mentions in this episode:   Faegre BD Franchise Summit https://www.faegrebd.com/faegrebd-franchise-summit   Paul Rocchio - IFA Procchio@Franchise.org 202-662-0790 Contact Paul for information about joining the International Franchise Association   Book: Dare to Serve By Cheryl Bachelder Servant leadership is sometimes derided as soft or ineffective, but this book shows that it's actually challenging and tough minded - a daring path. Bachelder takes you firsthand through the transformation of Popeyes and shows how a leader at any level can become a Dare-to-Serve leader.

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