Did you miss Tom Spadea’s “The Hidden Treasure of Franchise Resales” Webinar on May 25, 2023? Watch the full recording:

At some point in every business owner’s journey, the time is right to transition. The same is true for franchisees. Many franchisors have never really thought about how to manage the process of franchise resales proactively. They are missing an opportunity to add huge value to the system by transitioning out disengaged franchisees with new, well capitalized and eager franchisees.

Listen as a Podcast Episode:

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Did you miss Tom Spadea’s “Dealing with Non-Compliant Franchisees” Webinar on Feb 22, 2023? Watch the full recording:

Unfortunately, things don’t always go as planned in franchising. In the life of every brand, there will come a time when franchisees are not doing what you expect them to do. Non-compliance can take many forms. From franchisees who are financially struggling and falling behind in their monetary obligations, to franchisees who don’t buy into the culture and vision of the franchisor and are doing things “their own way”.

Non-compliance should be thought of like everything else in franchising, there should be a transparent fair system so everyone knows the rules. By having a plan and not being arbitrary, franchisors can deal with these issues efficiently and effectively. Learn some tips, tricks and guidance on how we recommend franchisors build a compliance program for their franchisees.

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Description: Building a solid compliance and tracking system for your franchise brand is not only a great protection against a possible dispute with your franchisees, but also the best way to position yourself for a third-party investment or outright sale of your entire system. Learn from franchise attorney Tom Spadea, who has built compliance systems for hundreds of franchisors and has directly advised private equity buyers on due diligence in dozens of transactions where entire systems are sold. Hear the good, the bad and the ugly and leave with practical solutions you can implement immediately. It is never too early to plan the end game.

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Tom Spadea led a session for The Franchise Brokers Association earlier this month. In this episode, Tom talks about how franchises are currently impacted by COVID-19 and what they can be doing now to prepare for what happens after the crisis.

[2:30-5:30] How do you want to be viewed after the crisis is over?

As we all are experiencing the effects of COVID-19, Tom asks everyone to think about what is actually in your control and how you want to be viewed after the crisis is over. Remember that you are living through your legacy as a business owner and the way you treat employees, vendors, franchisees, etc. during this time is going to be remembered.

[8:00-12:00] Never waste a good recession.

Don’t delay things that are in progress. If you put your head in the sand, you’ll be worse off. While you are in hibernation mode, think about things that you have put on the back-burner.

[12:30-15:00]Loans & forgiveness

If you need the funding, get it!

[19:10-23:30] Should brokers have clients continue or pause?

You shouldn’t be thinking purely about yourself. Remember, how will people look at you when the crisis ends?

Be kind, be conscious & build your reputation.

[23:30-26:30] Do you think taking one of the loans will negatively affect FDDs or a future candidate’s decision?

If you need it to survive, take the loan because we don’t know how long this will last. Tom doesn’t think this will negatively affect a candidate’s decision. We’re all going through the same crisis.

[26:25] Do you anticipate more bankruptcies?

Yes, you don’t need to “outrun the bear.”

[31:00-34:00] Recommendations for franchisees and franchisors regarding training and money

We’re now a country of germaphobes. Use this time to think about how things will be different after the crisis.

[34:00-36:20] This is a time where weaker systems may collapse, and it’s OK to use this time to reset.

Recognize when it’s time to hit the brakes or quit. If you were struggling before the crisis, you may need to revaluate. Use this as an opportunity to reset.

[36:20-37:30] Could this be a good time for franchise brokers to see what franchisors are doing?

Yes, brokers should connect with the franchisors to see how they are working with their franchisees. Franchising is going to come back & brokers should spread that positivity to franchisors.

[37:20-40:00] State registrations for FDDs

Many states are making changes, but they aren’t all completely clear. Brokers need to explain to candidates that there are going to be delays.

[43:00- 44:45] Advice to brokers: this uncertainty is a great exercise to get back to the fundamental role you play. Give coaching and guidance.

[45:45-47:00] Are virtual Discovery Days sufficient?

It is a reasonable replacement to an in-person Discovery Day. While it’s not the ideal situation, it’s what we have to do right now.

Watch the full webinar below:

Have questions? Feel free to contact us.

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To catch the latest Spadea Lignana news, be sure to tune in and subscribe to our panel discussions through our podcast on iTunes.

Implementing company culture and promoting it throughout your franchise is key to running a successful system. Tom Spadea sits with franchise experts, Rocco Fiorentino, Raj Bhatt and Stacey Kimmons to discuss company culture, why it matters and how to select the right people for your business.

Rocco Fiorentino, CFE

Senior Managing Partner, Primo Hoagies

Connect with Rocco.

Raj Bhatt, CFA, CFE

CEO of Woops

Connect with Raj.

Stacey Kimmins, CFE

Owner and President of FUN BUS

Connect with Stacey.

[3:00-6:34] Vetting Franchisees

We all struggle when it comes to finding the right people for the job. Rocco remarks, “It’s like a fine bottle of scotch.” You don’t need people that you necessarily connect with on a personal level right away, it’s about their performance. Are your people continuously improving?

“Dining with someone can be a good metric to use to measure character,” Rocco explains. If you take a potential franchisee out to lunch or dinner, “watch their interaction with the staff; are they forgiving and polite or high maintenance and arrogant?” This can be a helpful evaluation tool during the vetting process.

Raj and Stacey discuss why discovery day, a common industry standard that entails a day at the office for a potential franchisee, is beneficial. Raj points out, “It’s not always about the first interaction.” Spending an entire day in an office environment can help you build a relationship and understand how that individual reacts to your culture and particular day-to-day stressors.

[6:48-12:43] So, What is Culture?

It’s different to everyone, but to Stacey it means “a set of similar beliefs that make a system run successfully.”

Rocco adds, “It’s your brand DNA” and Raj states, “It’s understanding the human element in relationships.”

All three recognize that companies are spending more resources on culture in order to retain staff. Raj says, “There needs to be someone to systematically build culture.” When your employees are investing in your vision, it is important that you are maintaining a strong culture and living that every day, if not, your culture can shift quickly.

[12:50-17:31] What Are Some Challenges That Occur When Changing a Culture?  

Raj makes a good point: when your culture is changing, “you have to take an assessment every now and again.” Defining who you are isn’t a one and done thing; as your company grows, so does your staff. “Sometimes good employees are culture-killers.” Checking in from time to time to see your business on a larger scale can help you implement small culture changes, weed out cancerous employees, and remind your team what your franchise system is all about.

Stacey and Rocco agree that effective communication is big part of the pie too. “Some of the greatest ideas come from our franchisees. We would be foolish not to keep those lines of communication open. All of us are so much smarter than one of us.”

[17:32-34:49] The Importance of Strong Leadership & Culture

Raj believes, “Culture starts at the top.” At the end of the day, if you aren’t following the culture you are implementing, then your culture is confusing, and your team won’t follow you.

Stacey talks about the importance of culture discussions early on: “We talk about it at the beginning of training.” All three agree that having training documents where you speak about your culture is a great way to embed that message early on and deter confusion.

Although it weighs heavily on the franchisor to promote and explain the culture, it falls on a potential franchisee to understand if they align with that system’s values. Raj explains, having strong culture helps validate employees. “When you think about your favorite job, it probably wasn’t the one that paid you the most, it was the one where you learned a lot and had a lot of fun with your employees.” Before you sign the FDD, communicate and understand if your needs will be met.

[34:50-45:40] Culture Resources & Tips

Looking for ways to emphasize your culture? Stacey, Raj and Rocco recommend checking out the following culture leaders:

Not only is it a good idea to read up on what other culture motivators are doing, but it’s good to try some new things, like:

[47:30-50:11] Final Takeaways

Tom wraps up this segment by asking each franchisee for one nugget of truth we can all take away from this discussion.

Rocco: Ask yourself, “Am I doing the best I can?” Make sure to keep an open mind and consistently challenge yourself.

Stacey: “If you are an emerging brand, establish your culture early on and make sure your team reflects that. It’s harder to implement culture into your system later down the road.”

Raj: “Take a weekend to define your culture. Look at your management team and figure out how you can make an impact on each person at the office. You’ll see better growth and performance if you can identify what motivates your staff.”

Would you like to attend a Philadelphia Franchise Association event? Learn more and watch the full-length video here.

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To catch the latest Spadea Lignana news, be sure to tune in and subscribe to our panel discussions through our podcast on iTunes.

Our established panel of franchise industry professionals discuss best practices for emerging franchisors, marketing tactics, and how to manage your expectations. Listen as our 3 experts examine their experiences within the industry and help you make growth minded decisions for your brand.

Hand & Stone Massage, Multi Unit Franchisee

Connect with Dana

President, CEO, Founder of JDog Franchises, LLC

Connect with Jerry Flanagan

Rita’s Italian Ice Franchisee & President of the Rita’s Philadelphia Advertising Co-op

Learn More About Rita’s Italian Ice

Let’s take a look at a few key discussion points:

[2:47-14:10] New Franchisee Best Practices & Social Media Marketing

A good marketing strategy generates business. But how do you structure your plan to expand your base and bring in revenue? It depends.

For Jerry’s junk removal business, it began as a grass roots movement. “A lot of door hangers and lawn signs.” He jokes, “I don’t think I own a piece of clothing that doesn’t say JDOG on it.” Believing in your brand and being your brand become crucial entities for a startup looking to target local business.

Commitment and persistence are important for a successful marketing campaign. Dana explains, “Social media is key; you can’t just do a Facebook post once.” In order to generate brand awareness, being on as many platforms as possible on a consistent basis can create results. But it doesn’t happen right away. Dana suggests, “find an eager marketing student at a local college looking to boost their resume and manage a media campaign. A common misconception is that managing a social media account is free. But it’s not! It takes time.”

Mitch, a long-time franchisee owner in the well-established Italian ice franchise, Rita’s Italian Ice, brings a different perspective. “Advertising revenue was scarce in the 80’s, and these platforms weren’t available.” Be creative. Find new ways to boost your marketing. Direct mail, tv, print ads, and radio are still viable players. Understand your companies target audience; this will help you decide where your marketing dollars matter most.”

[14:11-19:04] The Importance of Earned Media

All the panelists agree that understanding your clientele and their needs are important. Jerry points out, “Customer referrals are critical.” If you are an emerging franchise, reviews can make or break your system. Remain relevant and provide quality customer care.  

How do you get franchisees to emulate your system? 

Establish a mentor system for new franchisee support. The first 6 months of a new franchise system is critical. Make it a point to be checking in on new franchisees to keep them on track.

[19:05-20:59] Open Communication is Key 

Mitch makes a smart observation, “Early success is not always continuous, which is a struggle.” Maintaining open lines of communication between a franchisee and franchisor becomes imperative. There will be times when you don’t agree, but vocalizing your concerns is a good idea.

[21:13-25:18] Flops in the Franchise Industry 

With every opportunity, comes the chance to “flop.” Without these learning moments, franchisees and their companies would become stagnant.

Dana and Mitch recall circumstances where communication was important:

Dana recollects a company-wide promotion that went awry; getting internal buy-in from your staff on big level projects when the idea comes from the top of your system can be difficult.

Mitch discusses R&D generated water ice flavor failures. “I wouldn’t have picked Twizzlers or Swedish Fish flavors.” Sometimes a franchisor can become so internally focused that they forget what it’s like to be “out in the field.” Speaking with franchisees and their employees can really set you up for success.

[25:19-33:09] How do you deal with a franchisee that doesn’t have the marketing mentality?  

Jerry remarks, “Sometimes it doesn’t matter how much you pound the same message in.” A franchisee still may want to recreate your system.

Although this is often the case, Dana says, “recognizing your franchisee’s background” will help you measure their strengths and weaknesses. Assessment tests are a standardized system that can help you pinpoint traits that are commonly shared among your top franchisees. Once you have a list of those qualities, look for prospective franchisees that share those abilities.

Mitch agrees, “as your brand grows, systemize! There is no secret recipe to make people do things the way you want them to; identify people who believe in your brand.”

[33:10-39:47] How do you coach a franchisee to receive buy in from employees?

Dana points out, “As a franchisee, I stop in to my stores on Saturdays.” Be visible and accessible to your staff.

Mitch drives home the importance of hiring the right people. “I can teach you to do the job, but I can’t teach you to smile and be pleasant.” 

[39:47-41:35] What questions should a potential franchisee ask a franchisor before signing an agreement? 

[48:30-51:06] Takeaways 

To wrap up the discussion, Tom Spadea asks the panel for one piece of marketing advice we should take away from this episode:

Jerry reaffirms, “Get your community behind you. You are your brand; market every single day. It’s a 7-day work week.”

Dana suggests, “Don’t eliminate any idea from your marketing campaign. Return on investment is different for every segment of a business. Adjust your expectations.”

Mitch closes the discussion with a final thought, “Consistency, continuity, and stick with your message. Build your brand, name, and awareness.”

Learn more about the Philadelphia Franchise Association and catch the full length video here. 

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To catch the latest Spadea Lignana news, be sure to tune in and subscribe to our panel discussions through our podcast on iTunes.

Our panel of experts discuss the 2018 tax law and how it affects franchise professionals in the upcoming years. Follow along as tax accounts, Andy Tarquinio and Tom Fleming, overview reforms that will take place on an individual and business level, helping you assess your business and maximize your returns.

Tom Fleming, CPA

Principal at WithumSmith+Brown and over 17 years of accounting experience, Tom provides service to industry specializations like, law firms, professional services, manufacturing, distribution and logistics, and high net worth individuals. Connect with Tom.

Andy Tarquinio, CPA

With over 25 years of experience in public accounting, Andy specializes in advising domestic and international privately-owned businesses and their owners, as well as publicly-held and investor-owned businesses with multi-state and multi-national operations. Connect with Andy.

Tom Spadea, Esq.

Entrepreneur and franchise lawyer, Tom, of Spadea Lignana, passionately assists his clients with a variety of legal issues, including private equity transactions, litigation, trademarks, partnerships, and real estate deals. Connect with Tom.

Let’s highlight a few key discussions during this event:

[1:34-7:06] The New Tax Law: Individual Changes

Last winter, the Tax Cuts and Jobs Act was signed cutting individual income tax, doubling standard deduction, and eliminating several itemized deductions. Tom Fleming goes into depth about the changes that will take place on an individual level with the hope that a drop in tax rates will stimulate business and generate economy until the bill expires in 2026.

[7:07-21:24] The New Tax Law: Business Changes

Andy highlights important tax saving opportunities for the franchise industry such as the rate reduction in C-corporations, the standard deduction increase to 20% for pass-through businesses, and the limit on deductible interest expenses. What does this mean for your business? These deductions offer pro-growth and slack in expensing and administrative burdens; however, will increase the deficit over the next decade and require remodeling changes to your business plan.

Both Andy and Tom agree that although the changes don’t necessarily show us a clear picture of the future, a significant drop in C-corporations and pass-through entities will deem us more competitive collectively in the global marketplace.

[21:37-46:24] Limitations

Like any law that is passed, legislature includes its limitations, with heavier burdens on higher income brackets. Andy and Tom discuss what these tax brackets look like according to your income structure and provide examples for pass-through deductions.

[21:39-23:52] Andy overviews 3 limitations: 

1. 50% of wages

2. 25% of wages or 2.5% of gross value depreciable property (Used for real estate businesses)

3. 20% of taxable income (To the extent that you are within certain income thresholds, this limitation would not apply. Nor would the specified service limitation.)

[25:31-26:33] The easiest way to explain the 20% qualified business income pass-through deduction: 

If your qualified domestic business income is 100 dollars, you start out with a 20 dollar deduction (20% of qualified business income). Then you will take a look at your wages; if 50% of your wages is equal or greater to your deduction, in this case 20 dollars, then you have no limitation.

In keeping with this 100 dollar example, let’s say your wages are 40 dollars. 50% of your wages is equal to 20 dollars. Because your wages are equal to your qualified business income deduction, you can conclude that you have no limitations.

[31:00-35:19] Andy provides an example of 3 individuals with 100,000 dollars in wages, however differing allocable pass-through wages.

Follow along with the illustration below as Andy walks us through 3 examples that explore the options a business may face depending on an owners decisions and the new limitations in place.

[46:25-51:14] Takeaways

Tom Spadea wraps up the discussion by asking Tom and Andy what our listeners should take away from this discussion: 

Tom states, make a game plan. “Sit down with your accountant, attorney, and financial planner. Understand your future plans.” Ask yourself, “Where do I see myself 5-10 years from now?”

Andy emphasizes how important it has become to define your business. “Make a list of critical questions: Am I a specified service business? Should I consider changing to a C-corp? Do I have foreign source income? Should I lease or buy? You can make these 1000 pages work for you” by asking the right questions.

Would you like to attend a Philadelphia Franchise Association event? Get more details and watch the full-length video here.

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