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Managing Franchise System Growth from the Start

By Kevin Adler
July 28, 2005

Successful franchisors that seek to expand their systems and new companies that are attracted to the concept of franchising face numerous legal, financial, and logistical challenges in developing and implementing a successful growth strategy. Anticipating those potential difficulties before they arise and finding ways to avoid them altogether are among the most important services that franchise counsel can provide. The 38th annual International Franchise Association (“IFA”) Legal Symposium in May 2005 included two well-attended sessions that addressed the major issues that franchisors often face when trying to expand their systems.

Franchisors are usually interested in expanding their systems, and this can be beneficial not only to the franchisor, but also to individual franchisees, said Eric M. Newman, executive vice president and general counsel, Bojangles' Restaurants, Inc. However, franchisees often perceive new franchises as encroaching on their marketing areas and potentially cannibalizing their sales. These potential conflicts must be handled through a combination of diplomacy and precise contractual language, he said.

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