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Research Newsletter May 17, 2006

Perhaps more than any single bit of data, the most powerful information that our database can provide about a franchise system is the relationship between all of the entities: parent companies who own franchisors, franchisors with multiple brands and multiple franchising programs, franchisees who are involved in multiple systems, subfranchisors, master franchisees, franchisees of subfranchisors, and on and on.

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From each perspective the definition of what is considered the primary entity changes. Some suppliers want to sell to every link in the chain from parent company to individual franchisee, while others only want to focus on one. Franchisors want to compare themselves to systems that have similar models. The SBA examines agreements at the program level, while investors and financial institutions look at entities individually and overall.

Inconsistent terminology complicates things. There are a multitude of terms systems use to mean the same things:

• Area Representative, Area Director, Marketing Director
• Subfranchisor, Master Franchisee
• Area Development Agreement, Multi-Unit Development Agreement

We spend a lot of time making sense of this complex environment. Because of the problems we see, we are beginning an effort at codifying the variety of business models and terms that are being used. When complete, we hope this will prove a valuable resource for everyone. We welcome any input you may have in this effort.

PREVIOUS QUIZ WINNER

Stan is Vice President of Franchising and Infrastructure Services for Plain Sight System, as well as President of American Leak Detection, Inc.. Stan earned his Doctor of Jurisprudence degree, cum laude, from Wayne State University. He was formerly partner in the Antitrust, Trade Regulation and Franchising Department of the Detroit-based Honigman Miller law firm, as well as Vice President and General Counsel of Little Caesar Enterprises, Inc., a billion dollar operator and franchisor of thousands of pizza restaurants throughout the world.