By: Josh Goldberg, Esq.
Shaquille O’Neal is the blueprint for athletes in the investor world. Besides his ventures with the Shaq brand, endorsements with IcyHot, Buick, and many others, as well as time spent as an actor in Kazaam, a co-host on TNT, and as an EDM artist under the name DJ Diesel, Shaq is also a seasoned franchisee. The All-Time NBA Great has owned as many as 155 Five Guys, 16 Auntie Anne’s, 9 Papa John’s, 40 24-Hour Fitness Centers, 150 Car Washes, and a Krispy Kreme.
Now, Shaq is on the franchisor side of things, with the launch of his fast-casual fried chicken restaurant, Big Chicken. Soon there will be 28 locations open and another three are open on Carnival Cruise ships with more to come.
A franchise is a business in which an operator (the “franchisee”) pays a mixture of upfront and ongoing fees in order to license the brand name and supporting resources of a parent company (the “Franchisor”).
Many franchises require hands-on operations from the owner, but some concepts are able to be run by an absentee manager with a designated manager and team in place to take care of the operations. Many athletes who get involved with franchising prefer to take the absentee-manager route and act as silent partners in the business. In these scenarios, the franchises are typically run by a family member, business partner, or a restaurant holding company.
Generally, a potential franchise investor will buy a single unit under a franchise agreement or agree to develop multiple units under a set development schedule under a multi-unit development agreement.
Other athletes that have had success with multiple units include:
Drew Brees: Brees has an ownership interest in over 100 locations of various franchises including, Everbowl, Walk-On’s Sports Bistreaux, Stretch Zone, Jimmy John’s, Dunkin’, and Smalls Sliders.
Magic Johnson: Magic Johnson Enterprises has 30 Burger King restaurants, more than a dozen 24-Hour Fitness Centers, a TGI Fridays, and at one point over 125 Starbucks.
Jamal Mashburn: Mashburn has ownership interests in 40 Papa John’s, 38 Outback Steakhouse restaurants, and 3 Dunkin’s.
Junior Bridgeman: At one point owned over 263 Wendy’s and 123 Chili’s restaurants.
Angelo Crowell: Owns and operates 40 Jersey Mike’s Subs and plans to open 12 Slim Chickens.
So Why Have These Athletes Found Such Success with Franchising? Besides the fact that they’ve surrounded themselves with a great team of people and operators, athletes have had franchising success because many of the skills that lead to performing as high-level professional athletes translate well in franchising:
Playbook
A franchise is operated similarly to a playbook. Franchisees receive operating manuals in order to install and follow processes to replicate the same success of other corporate and franchised units.
Coachable
Franchising lends a support system and the best franchise operators, like athletes, are coachable and learn to run the business.
Leadership
In order to run a successful business, like a sports team, you must be able to lead a team of people.
Passion for People and Service
Many franchises, whether it’s a food concept, gym, home-service-based business, or medical spa, are people-first businesses where service and consistency is key.
Ongoing Training and Support
Athletes understand what it takes to stay on top of their game. The same can be said for franchisees. In order to get better, you must continue to train and understand the business.
The Franchisor-Franchisee relationship is typically very one-sided so franchisees should understand what they’re getting themselves into and what can potentially be negotiated in an addendum to a franchise agreement before signing the dotted line. Besides the franchise agreement, the second most important document a franchisee will sign is the lease for the business.
Location, location, location! Your location and territory for your franchise may make or break your business and it’s hugely important to do plenty of research before selecting a location. Securing a space with visibility from a main road and ensuring you have a panel on the shopping center’s pylon sign (the free-standing sign visible from the road that markets the various tenants of the shopping center) will make certain that potential customers are aware of your existence in that shopping center. Further, once you have secured a space for your franchise, it is crucial that you ensure you protect your rights under the lease agreement by including an “exclusive use” provision, which prevents the landlord from leasing another space in the shopping center to a direct competitor of your business concept.
The Franchise Practice Group at Greenspoon Marder regularly reviews Franchise Disclosure Documents, Franchise Agreements, Multi-Unit Development and Area Development Agreements, and negotiates and drafts addendums, as well as reviews and negotiates leases for franchisees, in addition to other franchise-related services.
About Greenspoon Marder Greenspoon Marder LLP is a full-service law firm with over 225 attorneys and more than 20 office locations across the United States. With operations from Miami to New York and from Denver to Los Angeles, our firm attracts some of the nation’s top talent in key markets and innovation hubs. Our core practice areas include Real Estate, Litigation, and Transactional Services, complemented by the capabilities of a full-service firm. Greenspoon Marder has maintained a spot on The American Lawyer’s Am Law 200 as one of the top law firms in the U.S. since 2015, and our goal is to provide exceptional client service by developing a thorough understanding of each client’s business needs and objectives in order to provide strategic, cost-effective solutions.
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