Submitted by Jim Herst on Tue, 2007/10/16
In Negotiating with A Franchisor During Bankruptcy, a Franchisee May Think, "I Can’t Do That!", But Here's Why They Can and Should
Too often I hear from a debtor, a franchisee, exclaiming, I can't do that! He's objecting to advice from me that a fiscal obligation be approached seeking a settlement.
Let me explain.
Knowing that a contract exists, one carefully detailing what must be paid if such and such happens, my debtor/prospect rues that he must absolutely do what he contracted. In this instance, a ZEE, fiscally bankrupt, has closed his business, yet finds himself contractually obligated to pay money to his ZOR. I agree, the contract does call for complete satisfaction.
However, the ZEE hasn't got the money!
The options are few, so thinks the ZEE. He can borrow money to satisfy his contract obligation. He can approach the ZOR and beg relief and possibly arrange a long-term payout. Because the amount owed was big, and because this ZEE has many other big obligations he can consult a bankruptcy attorney and seek relief of all his debts.
All good alternatives, yes?
Borrowing money to pay debt only incurs more debt.
Agreeing to full pay over time is dragging an anchor weighing down an ongoing journey to a new and hopefully better future. Bankruptcy, another option, is really no solution in that it becomes surely a personal impediment and usually an embarrassment. Worse, bankruptcy laws as now exist often impair a debtor so greatly that he may not qualify for total relief. (Discussion of bankruptcy laws can be a topic for a major blog. But not here, now.)
What to do? We suggested: Seek a settlement.
Again I heard, I can't do that! They would never agree, they will sue me; they have ways to make my life, my whole existence horrible. They have ruined the life of another who failed and they'll do the same to me.
From experience, I disagreed. A creditors legal choices notwithstanding, most will accept settlement!
The key is in the presentation that seeks the settlement. However, a poor presentation can lead to non-acceptance and that may lead to the feared lawsuit. But recognize, almost all suits for money are settled at the last minute on the courthouse steps.
Such fact tells something. It tells that a strategically designed offer of settlement, presented factually can work. In this instance, about $125,000.00 was contractually due the ZOR.
My Debtor/Prospect suggested he would be happy if he were to achieve a reduction of 33% with the balance, $83,000.00 payable over four years.
Sound good? He thought so. I didn't.
Yes, I did have to do some power selling, and my Prospect became a Client. Since this was the biggest obligation of his six outstanding debts, I approached the ZOR and over a four-week period of negotiation, the debt was settled for less than $20,000.00 with four equal successive monthly payments of less than $5000.00 each. His other debts were also settled at the same rate, 14.25% of what had been owed.
The ZOR wasn't intimidated. The ZOR wasn't fooled. The ZOR, when consenting to consider alternatives, negotiated in good faith with an Authoritative Third Party (us) and was positioned to see a mutually acceptable solution that resulted in ZOR's realization that a bird in the hand is better than two in the bush.
The moral of this event? Everything is negotiable.
In 45 years in the business of Debt Settlement, it is apparent that a well-presented and factual offer will gain an audience and in most instances result in satisfaction for both parties. This is a reinforcement of the principle that there is no substitute for experience. If you are facing any area of debt problems, I again invite your anonymous submission for review.
Jim Herst is president of Performance Source Inc., a nationwide strategist organization serving business managers with credit restoration and payment systems in addition to designing cash flow processes. More information is available on site at performance source inc. Or Call Jim at 800-883-5080.