According to a recent study released by Aberdeen Group, 63 percent of companies plan to increase their social media marketing budgets in 2009, despite the current state of the economy. Meanwhile, consumers are beginning to expect companies to have a social media presence. “Ninety-three percent of Americans expect companies to have a social media presence and are using [social media] to participate in conversations, engage with brands, and find job opportunities,” says Gini Dietrich, CEO of Arment Dietrich, a communications firm specializing in franchise and business services.

Franchise companies are delivering on that expectation. Church’s Chicken tempted fans to join its Twitter feed by giving away $1 to every person who signed up during a 30-day period. Pizza Hut went on a hunt for a “twintern” — an intern who could use the Twitter lingo to keep fans up-to-date on Pizza Hut happenings. And Papa John’s launched its first Facebook-exclusive promotion in March.

Meanwhile, Computer Explorers is using social media tools to reach not only consumers but potential investors as well. The company has a franchise development YouTube channel where testimonies are posted from new franchisees, it has a Facebook page where announcements are posted advertising upcoming programs and videos, and it connects with others regularly via Twitter. “We have identified the profile of a Computer Explorer franchisee and are concentrating on social media search to engage those individuals,” says Deb Evans, president and CEO of Computer Explorers.

These franchise companies may be making headlines with their social media tactics, but they’re just leading the pack in what’s expected to quickly become a mass movement. “I think that social media will be adopted by 80 percent of the franchisors in the next two to three years,” says Joel Libava, aka “The Franchise King.” “But it won’t be called social media. It will just be the way we all do business.”

How can you use social media effectively? Here are some pointers to get you up to speed:

* “Prioritize your social networks and prioritize your time,” advises Dietrich. “If you are a business-to-consumer company, use Facebook — both fan pages and groups — and Twitter to meet your social media goals. If you are a business-to-business company, use Twitter and LinkedIn to achieve your social media objectives. Start with easy-to-achieve vehicles and build from there.”
* Stay informed by staying active. At the IFA’s annual conference in February, several sessions focused on technology and social media.
* Join forces with other franchisors. Evans at Computer Explorers conducts monthly conference calls with a small group of franchisor CEOs. The topic of conversation over the last few months has focused around social media.
* Just jump in. “Social media is not an exact science, so to engage, you need to jump in,” says Harrison. “It is such an evolving medium that it is hard to know all the answers before launching. Franchisors need to accept the idea that this is a ‘learn as you go’ frontier of communications and marketing, much like the Internet was not too long ago.”.
* For those franchise companies that are still a bit intimidated by the unknown of social media, Dietrich stresses that getting on board sooner rather than later is crucial. “If you’re not monitoring real-time conversations, if you’re not participating in the conversations, if your messages are still canned PR talk, if you’re scared of your general counsel, or if you just don’t have time, you will not have a business in a few years,” she says. “Social media is not a trend. It is the way we’re going to communicate into the future.”

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Beyond these industry-specific traits, however, there are three key characteristics that all franchisors look for.

1. Adequate capital. For most franchisors, having adequate capital is the first hurdle a franchisee must pass before other factors are even considered. “[Franchisees need] the ability to provide the necessary initial capital, plus a commitment for contingency funds. Things never go as planned,” says Kushell

David McKinnon, CEO of Service Brands International, franchisor of concepts including Molly Maid, Mr. Handyman, and 1-800-DryClean, puts it this way: “If the space shuttle leaves the launch pad with 80 percent of the fuel required to get to space, it will travel the first 80 percent just as quick and just as fast [as if it had 100 percent of the fuel]. But the remaining balance of the trip will end in a total failure of the entire mission, as there are no refueling stations on the way to space.

“So it is in business,” McKinnon continues. “If you don’t have all the capital required to get to break-even, the first part of launching your business will feel like everything is going well. However, when you run out of capital, the banks won’t lend you any more, because you are now at the highest point of risk.”

Just as important as having adequate capital is knowing how to manage that capital. “[Franchisees need an] understanding of basic finance and accounting in order to regularly analyze their franchise’s P&L, cash flow and balance sheet data,” says Kushell.

While having the capital for a successful launch is crucial, “Most large franchisees didn’t start off on day one buying huge territories, but instead started with smaller territories or a single unit,” says Dan Rowe, President of franchise development company FranSmart. “So while someone has to have the capital to at least get the business opened comfortably, they don’t need to have the capital for [a multi-unit] development.”

2. Willingness to follow the franchise system. “More than anything, I would want a franchisee who is going to follow the system at a very high and enthusiastic level,” says Rowe. “For example, Elevation Burger doesn’t really need franchisees who went to culinary school. They need franchisees happy to follow the system that Elevation already has for making the food taste like it is supposed to.”

“If a franchisee is willing to do everything [the franchisor] tells them to do, then it doesn’t matter that they don’t have food or accounting or marketing skills, because they can always hire people [who do],” Rowe adds.

Kushell notes that franchisors don’t want someone who is “too entrepreneurial to the point where you know better than the franchisor and want to change the system.” In fact, he says, franchisors should actively background check prospective franchisees to make sure they don’t show signs of being “dissidents, adversarial or difficult to work with.”

The importance of following the proven system, says McKinnon, is why former military personnel are very good franchisee candidates.

3. Willingness to work hard. If you think that buying a franchise means you’re going to have everything handed to you on a silver platter, think again. [Franchisees] must be willing to work harder than they have ever worked in their lives,” says McKinnon. “There is no ‘easy’ business or franchise, despite what many believe. All startup businesses are hard work, and starting a franchise, while it has much less risk than a nonfranchise startup, is still hard work.”

Kushell agrees, noting that savvy franchisors will check a candidate’s references looking for a past history of “accomplishment, hard work and motivation.”

In addition, says Kushell, most franchisors will want to see a full-time commitment of the franchisee’s time and resources. “While some franchisors will sell to an absentee investor, I believe it is essential that a franchisee’s full time be [committed if] operating a single unit.”

Since part of working hard is dealing with the inevitable conflicts that arise, franchisors seek franchisees with problem-solving skills. “Every relationship [has] problems,” says Kushell. “The ability to resolve them — both within their franchise and in their relationship with the franchisor — is essential.”

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But for a host of reasons, most prospective franchisees never realize they have opportunity to negotiate the terms of a franchise agreement. The Franchise Disclosure Document (FDD) is required to be in plain English, but the agreement isn’t. It is usually presented in full legalese, impenetrable and near impossible for the non-lawyer to read, let alone understand. The contract is presented as a uniform – and uniformly accepted – document: “It’s what everyone signs,” the franchisor says.

Sometimes they’re right; but more often than you might expect the terms are negotiable–if that’s what it takes to close a franchise sale.

You may hear a lot of reasons why the agreement cannot be negotiated:

“We want everyone under the same system.”

“The lawyers won’t let us touch a thing.”

“My boss would kill me if I brought back a bunch of revisions.”

Franchise documents carry what negotiation theorists call “the authority of the printed document.” The franchise disclosure document and the form contracts it contains are intimidating. You know the routine: “Hey, this is all printed up. It’s a form. Change it? We can’t change it, my friend, it’s printed.” The very fact that it is printed up and part of a fat disclosure document conveys the very powerful idea that it cannot be altered.

Franchisors do have some very genuine reasons as to why they do not like to see the terms of the agreement changed. Involving their own lawyers in responding to proposed changes adds the expense of legal fees to the franchise sale—expenses that the sales program is not usually structured to carry. Negotiated changes create variables in their systems that can be devilishly difficult to administer, and in one state, California, there are regulatory consequences: subsequent disclosure of negotiated changes. Franchisors like having all of their franchisees on the same legal footing (even though, if truth be told, there is often substantial variation from one franchisee to the next). Franchisors know that franchisees compare the “deals” they got when gathering for system conferences, and variations can cause resentment and bitterness.

So, can you negotiate a franchise agreement? I have represented some well-established franchisors that have flat no-negotiation policies (at least outside of Virginia, where negotiation is required by law, on pain of the franchise agreement becoming “voidable”). Other companies, usually younger and hungrier for the sale, want to hear what the prospect and his or her lawyer have to say.

It boils down to this: It doesn’t hurt to ask. Lawyers experienced in this field know that even if the franchisor flatly refuses to negotiate, walking a prospect through the items that the lawyer would like to see changed, and presenting those points to the franchisor, is a good way for the prospect to understand some of the most important features of the franchisor–franchisee contractual relationship. Not only does it not hurt to ask, it usually helps the prospect understand the relationship he or she is buying into.

If the franchisor is willing to negotiate on the agreement, there are some topic areas that are more likely to be acceptable to the franchisor than others:

* The initial fee is more likely to be reduced than the continuing royalty fee rate.
* The territory geography is more likely to be altered by the franchisor on your request than the scope of the rights and protections enjoyed within the territory.
* The timing of opening for business more likely to be negotiated by the franchisor than the grounds available for termination by the franchisor.
* Franchisors will rarely, if ever, negotiate on the trademark provisions.

Yes, franchise agreements are certainly negotiable. You may indeed get turned down, but it really never hurts to ask. Just remember that as a prospective franchisee you have a remarkable source of power: The franchisor does not want you getting up from the table and walking away from a franchise sale.

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1. Can you get a good location? In a retail or restaurant franchise, location has always been a key consideration. Now, with consumers choosier and less likely to buy on impulse, a good location — one that attracts traffic, has adequate parking and suits your space and build-out needs — is more important than ever. Look for a franchisor that helps you with site selection, and make sure you and your franchisor thoroughly assess all the pros and cons of a potential site. The good news is that as more companies go out of business, more desirable locations are becoming available. And landlords who are left with fewer options for tenants are increasingly willing to make deals. Now’s the time to try to negotiate everything — whether it’s a shorter lease, lower rent, or additional services or perks thrown into the lease. As a franchisee, you have the leverage of a franchise’s brand name on your side when negotiating with a landlord. And due to today’s tough economy, some franchisors are offering help negotiating your lease.

2. Do the market conditions support your success? Do thorough market research into the area where you’re considering locating. You may be buying into a fantastic franchise system, but that won’t matter if the concept isn’t right for your local market. Investigate the demographics of your market, the income level, unemployment rate, and other key factors to get a picture of who lives in the area and what their spending power is. You can find lots of information at the Census Bureau’s site (www.census.gov). Also talk to local sources, such as the Chamber of Commerce and local business networking groups, and read local newspapers and business publications. By keeping your finger on the pulse of the community, you’ll know where the opportunities lie…and where they don’t.

3. Will it be easy to hire? Employees are key to the success of a franchise business, but hiring workers for a small start-up company is often a challenge. The silver lining of having so many Americans out of work is that it’s easier than ever to find qualified employees for your new franchise location. In fact, the challenge may be not so much finding candidates as keeping up with all the job applications you’ll get. You will have the luxury of being choosy.

4. Is there a demand for your product or service? These days, consumers are still spending — but in general, they’re spending on necessities, not luxuries. If the franchise you’re considering offers something consumers need no matter what the economy — such as tax preparation, plumbing, or IT services — it stands a better chance of success than if what you’re selling is more of a discretionary purchase. Again, here’s where you need to know your specific market — both the geographic region and the target customer — and figure out what those customers consider necessities or luxuries, as this will vary depending on the age, income level, sex, and other factors of your target market.

5. Can you get a good deal from the franchisor? As tight credit markets have slowed franchise sales, many franchise companies have begun offering additional assistance with financing, discounting fees, or offering other financial incentives for franchisees who sign agreements in 2009. For example, frozen yogurt franchise Red Mango’s “Red’s Real Deal” offer knocks $10,000 off the franchise fee, contributes $10,000 to the location for store marketing, and offers to repurchase the store from any franchisee who is dissatisfied for any reason within six months of launch. Pizza franchise Papa John’s “25th Anniversary Development Incentive Program” waives the franchise fee (normally $25,000), waives the royalty for 12 months, and gives franchisees a $10,000 early opening award. Be aware that you must have a good credit rating and be in good personal financial shape to take advantage of financing offers like this.

Depending on the answers to these five questions, you just may find that despite poor economic conditions, now is the ideal time to buy a franchise.

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