How to avoid the bankruptcy filing of a franchise

When a point-of-sale in the franchise or the head of the network starts to pitch, you have to react quickly.

pay attention ! When a point-of-sale is beginning to show signs of weakness, it is often the entire network, which plunges ! "And it can go very quickly," warns Laurent Delafontaine, co-founder of the consulting firm, Axis Networks. A vicious cycle then takes place : the turnover decline, the royalties paid by the franchisees to their network head space out, royalties are paid to the account-drops... the Result : the franchisor no longer has the means to fulfill its responsibilities and its results collapse."

What are the franchisees who clink glasses

The descent to the underworld, dozens of brands young people or less young people experience it every year. This is a little in the light of the 1 976 networks identified in 2017 for the French Federation of the franchise. But in the end, it is the franchisees who clink glasses : either because the brand files for bankruptcy, either because it is sold to a competitor, investor or a fund who do not necessarily have the same vision as the team with which the franchisee had initially committed. If the contracts usually include a clause intuitu personae, it does not imply that the franchisees : a franchisor can control who its partners give their point-of-sale ; on the other hand, franchisees do not have their word to say when the network is sold.

It is thus that in the course of the past five years, Quick has been sold to Burger King, Groupe Flo (Hippopotamus, Maître Kanter, Bistro Romain) the group Bertrand, Darty Fnac, Midas and Buffalo Grill in investment funds... in the short term, this does not change large-thing to the franchisees : "the terms of The contract may not be altered," said Laurent Delafontaine. But to its expiration, the new owner may propose a renewal on less favorable terms : at Buffalo Grill, for example, areas of exclusivity were reduced, and the franchisees Quick were offered a new contract with an obligation to invest in order to bring their restaurant to the standards of Burger King." A little stiff, but they can find their account : "In being redeemed by groups more dynamic, franchisees, Quick, and Flo don't lose at the currency exchange," observes Laurent Delafontaine, adding "that it is generally better to be assigned to a brand or a group of the same sector of activity as an investment fund."

During the acquisition of Quick by the Burger King corporation, franchisees are offered a new contract with an obligation to invest in order to bring their restaurant to the standards of Burger King.

AFP

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Not to reassure the franchisees of the Pataterie : the sign of restoration specialist has experienced two years of hell. From 2015 to 2016, the turnover has increased from 163 million euros to 142 million euros. The brand has tried to respond by revisiting its concept, its decoration and card. Too late : short of cash, it was placed into receivership at the end of October 2017. The crisis of the restoration and its problems of supply have undoubtedly accelerated his fall, but the problems of the Pataterie from a too rapid development and poorly controlled. Result : the sign has been acquired at the bar of the tribunal de commerce de Limoges by two funds of so-called "reversal" (specialized in the recovery of a business in difficulty) for the modest sum of 300 000 euros. "A pittance in relation to the value of this sign which counted up to 220 restaurants in 2015," said a connoisseur of the folder. Since then, some sixty of them have also dropped the curtain.

Founded by Alexander Maizoué and Jean-Christophe Pailleux, the sign restoration specialist The Pataterie has seen its turnover go from € 163 million to 142 million euros between 2015 and 2016.

La Pataterie

Every failure has its own story. But in general, the failures of networks fall into four phenomena : the brand has accumulated errors of casting (to the team leader, or among the franchisees) ; the leaders were too greedy, to the detriment of the animation of their network by capturing too large a portion of the royalties ; the development has been too fast, at the price of a selection is not quite rigorous, partners or locations (such as in the case of the Pataterie) ; and finally, the concept has not been able to evolve and adapt to the needs of consumers. "The signs must be renewed regularly," observes Florence Soubeyran, head of Trade and openness of the people's Bank. If they don't evolve with consumer trends, they lose their relevance. It is for this reason that a network must have branches : to stay in direct contact with the market and test its innovations."

Identify the source of the problem

In a direct relationship with their customers, the franchisees can quite easily perceive the first difficulties : "It is necessary to be very attentive and avoid playing the ostrich policy", recommends Charlotte Bellet, an associate lawyer with the firm BMGB & associates. This remark applies as well to the difficulties traversed by the whole of the network than for those related to the exploitation of his own point-of-sale.

The first thing to do is therefore to identify the source of the problem : the franchisee is the only one involved or his confr&north border of republice;res experience similar difficulties ? The diagnosis is easy enough to do : most of the management software made available signs that enable franchisees to compare their turnover and their key ratios (average basket, conversion rate estimates, turnover per square metre) with those of other franchisees.

Renegotiate the contract

If the entire network experiencing the same problems, the franchisees have every incentive to stick together and to articulate common demands. This is done 306 franchise of the Accor group (operator 875 hotels, representing 70 % of the park) to request, in June 2017, a mediation with their heads of network. In game : the renegotiation of their franchise agreement. They believe that the fee they pay has become too high since the brand has opened its booking platform to hundreds of independent hoteliers. "This unilateral decision of the group, without consultation with franchisees, has seriously weakened the relationship of trust," says Arnaud Fayet, president of the board of directors of the Association of franchisees Accor. By joining together, the franchisees have more chances to be heard. Especially if they are in a position to make concrete and realistic proposals : "Write a common text is a good starting point," explains Laurent Delafontaine. Set of factual elements makes it possible to discuss more calmly, without falling too quickly in the conflict, or invective.

Considering their fees are too high, 306 franchise of the Accor group have asked last June to renegotiate their franchise contract.

Jacky Naegelen

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In case of problems, the question of responsibility is not always easy to decide. A Epinal, Kathy and Eric Boisset have closed the doors of their restaurant Memphis Coffee in February 2017. In just three years of operation, the couple has, unfortunately, accumulated 150, 000 euros for late payment of royalties and various materials) with its franchisor that eventually take the decision to break their contract. The franchisees had the impression that the restaurant was doing well. But it was still far, very far from the 1.7 million euros of net sales forecast prepared by the market research study conducted by a firm recommended by the company. Error : this survey and the estimated operating account must be systematically carried out and/or validated by a firm or an external accountant who is familiar with the local market and its business realities. Because it is usually upstream of the opening that lie the reasons that lead a franchisee to failure.