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Brand Changes: Are franchisees responsible for the expense?

 

Recently, I have noticed that the Wendy’s restaurants in our area have been remodeled and are utilizing a new logo with a different font.  According to an article in The New York Times, the change was first announced in 2012 with a goal for at least half of the individual franchise locations to have implemented the change by 2015.  The brand change is the fifth one for the Wendy’s franchise since it was founded and the latest change incorporates a more modern and contemporary look in an attempt to distinguish itself from other fast-food establishments.

Brand changes are not uncommon for franchise systems and can occur for a variety of reasons.  Some, like Wendy’s, implement brand changes in an effort to stay relevant to their consumer base and distinguish themselves from their competition.  Other times, a brand change becomes necessary due to trademark issues or other underlying reasons.  Regardless of the reasons behind a brand change, it is most likely the responsibility of the franchisee to carry out the brand change at their location, including paying all of the associated expenses, in order to meet the franchisor’s specifications.  Some franchisors also require franchisees to remodel or make improvements to their location periodically throughout the term of the Franchise Agreement.  If they do not have periodic remodeling requirements, remodeling the franchise location is almost always one of the conditions for renewing the Franchise Agreement.  In order to renew the Agreement, franchisees are likely required to bring the franchise location into compliance with the then-required specifications and standards for new franchises.

The Franchise Agreement should cover the topic of brand changes and/or any remodeling requirements, as well as, who is responsible for covering the expenses associated with such events.  If the Franchise Agreement does not cover these topics, you should ask the franchisor about them, including the following questions:

  1. Are there any current plans for brand changes in the future?
  2. How many brand changes has the franchise implemented over its lifetime?
  3. How often are franchisees required to remodel their establishments?
  4. What has the average cost been for brand changes and/or required remodeling in the past?

Knowing what this extra expense may be, and when you may be required to institute brand changes or remodel your location, will allow you to more adequately determine the overall expense and value associated with owning and operating your franchise location.