THIS IS AN OPINION
We'd also like to hear yours.
Tweet us @ArkBusiness or email us
I’ve always been fascinated by the franchise business model. Like anything, it comes with a host of benefits and drawbacks, but I’ve always struggled to see myself on either side of a partnership due to the amount of control that both parties to a franchise agreement must cede.
Arkansas Business readers recently got a look at both sides of that coin.
The first was an interesting article about budding plans for Dempsey Bakery, the gluten-free shop in Little Rock.
The Fowler family — which until 2021 operated as a large, highly successful KFC franchisee — bought the bakery from founder Paula Dempsey with plans to take Dempsey franchises nationwide. I’m excited to watch this niche business’ plans unfold, and I hope for its success.
At the other end of the spectrum is the story of a local American Leak Detection franchisee, who, along with several other ALD franchisees, appears headed for a nasty split with the franchisor.
In short, the American Leak Detection franchisees want to sell their local affiliates to an outside investor or even back to American Leak Detection.
But the parent company appears to be exploiting a loophole in the franchise agreement to prevent the franchisees from selling at all. I sure wish the corporate office would tell us their side of the story, but I suspect we’ll learn more after arbitration.
Essentially, we’re told that American Leak Detection’s franchise agreement gives it the right of first refusal to buy out franchisees who receive an outside offer for their businesses by matching the offer.
However, ALD, the franchisees say, declined to act on the offer, neither allowing the sale to proceed nor making a matching offer. This has left the franchisees stuck in limbo.
The American Leak Detection saga is an unfortunate case study.
I feel for Matthew Hill, who owns the American Leak Detection franchise in North Little Rock, along with the other franchisees, many of whom I’d guess are simply tradesmen whose skill and hard work turned them into business owners.
It’s a good reminder to always read the fine print. Better yet, hire a lawyer to read it for you.
How could someone really cheat me? That’s never a bad question to ask yourself.
Franchising offers many people the only path to business ownership, but how frustrating it must be for someone like Hill who can’t get the equity — both real and sweat equity — out of the business he helped build and sustain.
Still, franchisors are taking on risk and providing administrative services, branding and more. They should be protected too.
The best arrangements are to the benefit of both parties. Based on the people involved, I suspect a franchised version of Dempsey Bakery will be a model across the U.S.
Sign up for Daily E-news
