In this episode, Brian Schnell and I talk about Three Party Franchising – that’s using Area Developers and Master Franchisees 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 the 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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