Have you heard about 7-Eleven’s Zero Franchising Fee program? Under the Zero Franchising Fee offer, 7-Eleven is waiving the Initial franchise fee until June 30th on 200 stores for prospective franchisees ‘21 or older that are permanent U.S. residents, have excellent credit and $50,000 in liquid assets.’
Attracting qualified prospective franchisees is a challenge faced by many, most, if not all franchise systems. Offering discounts and special offers can be great way to attack prospects. However, franchisors need to be careful about discrimination and disclosure when offering discounts and special offers.
Many states have relationship laws, which prevent discrimination of franchisees. Yes, discrimination laws. When we think of discrimination, we think of employment issues and public accommodations. We don’t think of franchising. But, there are discrimination laws in franchising. Discrimination laws prohibit franchisors from treating similarly situated franchisees differently. Hence, charging one prospective franchisee an Initial Franchisee Fee and not another, because one is of foreign nationality or is over 50 years old, can go awry of franchise discrimination laws.
And, if you offer discounts or special offers, you must disclose the discounts and specials in the franchise disclosure document [FDD] at the time the special or discount is being offered and forever more. When the special or discount is being offered, the discount or special must be disclosed. When the offer expires or is withdrawn, the discount still needs to be disclosed in the disclosure documents, forever more.
It is common place for new or developing franchisors to offer Initial Franchise Fee discounts. It is common place for franchisors to offer discounts to defined groups such as military veterans or existing franchisees. It is all good. However, introducing such discounts should be done carefully. Before introducing discounts or specials, franchisors should:
1. Properly and clearly define perimeters and qualifications for the any discounts or specials, and
2. Amend franchise disclosures documents to reflect any discounts or specials.