Creating franchise disclosure documents is required by franchise law but the focus of your work in writing them is to turn good franchise managers into great ones.

Franchise disclosure documents are required to be sent to any potential franchise owner well in advance of when the franchise agreement is signed.  That is not just a friendly reminder from your neighborhood franchise lawyer.  That is the franchise law and to not do it would bring your franchise program to a grinding halt. It is easy to see this requirement that you give to your future business partners such an in-depth and detailed amount of franchise information as an imposition and a burden.

These franchise disclosure documents will be one of the biggest challenges that will face you as you prepare to put your business into a new level of expansion through franchising.  Many disclosure documents become very large and there is no getting around the fact that you, the business owner, must be involved intimately with every page of those documents.

There is no passing this task off to a low level clerk or a ghost writer.  Franchise disclosure documents become part of the legal paper trail of your franchising effort.  To put it bluntly, what you hand over to future franchise owners in franchise disclosure documents becomes legally binding. So it is crucial that you approve and edit every page, every paragraph, and every line.  The best case scenario is that you write every word of the franchise disclosure document or at least that every thought in that massive documentation project are your thoughts.

Look at franchise disclosure documents as an opportunity rather than a problem.

There are two reasons to fight off the urge to look on the preparation of franchise disclosure documents as a nuisance and a burden that the government has come in and heaped on your already too darn busy schedule.  For one thing, if you resent having to prepare your FDD franchise disclosure document, you will probably do a shoddy job of creating this crucial document. That is not a good idea both because it is lazy and because of the negative impact it will have on your hopes and dreams for great success in franchising.

The second reason to put some tender loving care into creating franchise disclosure documents is because the franchise buyer is required to know inside and out what you put in there. That makes franchise disclosure documents valuable training tools.  Here in this one piece of required reading, you can put each and every new franchise owner through a virtual basic training in what it takes to be a great representative of your business.

The old, worn out saying that it is an opportunity instead of a problem applies truthfully to writing your franchise disclosure documents.  There may be no step in the process that is so full of potential to convert raw recruit franchising hopefuls into highly trained franchising experts ready to get out there and make big money for you. That is reason enough to work hard making franchise disclosure documents that you can be proud of.

 

 

The franchise offering circular is required by law to be sent to your franchise applicants because it discloses everything they need to know before buying a franchise in your business.

The franchise offering circular is one of two or three franchise documents that make up the foundation of any great franchise relationship you will build.  When a potential franchise owner begins to poke around and sends up signals that he or she might be ready to buy into your business, the most important thing that can happen is to bring them up to speed with who you are, how they should get jump through the right hoops of buying a franchise and what life will be like when they are a full fledged member of your franchising community.

The franchise offering circular has gone through a lot of evolution in the last few years.  It is a standardized format because it is a document that you are required to send to a new franchise owner within the last few weeks before the deal is done. It is also a document that can get quite bulky because there are 23 different areas of disclosure that you have to cover when organizing a franchise offering circular to send it out to your future partners in money making.

That evolution has been so dramatic that the name of the franchise offering circular has gone through change as well. These days it is most commonly referred to as the franchise disclosure document or FDD for short.  The name change is worth tucking away in your memory banks because when the FTC begins to ask questions about your FDD so they can give you the nod to keep your franchise momentum going, it is good to know what they are talking about.

The name change from franchise offering circular to franchise discloser document puts the emphasis on an important word – disclosure.

For once, the government pencil pushers came up with a pretty good name change for the franchise offering circular.  For one thing, this disclosure document is far from a circular.  When we think of a circular, we think of that 5 page advertisement that you get from the grocery store that lists the specials of the week each Wednesday.  The franchise offering circular, or the FDD as we call it in these modern times will commonly get to a very impressive size.  Some complicated versions of the franchise offering circular have gotten as big as 500 pages long.

If you think putting together the franchise offering circular is a chore for you, think about the future franchise owner getting that encyclopedia of franchising in the mail.  As a disclosure document, they are expected to be aware of everything you are disclosing to them in the franchise offering circular. When they sit down to sign that franchise agreement and make this new partnership a formal affair, there is no saying they were not informed. So you make sure you pour your heart out in that franchise offering circular so if there are any questions or disputes once the franchise is open and money is being made, you can always point to that disclosure document and say, “Hey it is all right there in black and white for anyone to see.”

 

Franchise legal documents must be completed in compliance with the FTC but they also serve a valuable function for your future franchise owners.

The franchise legal documents that must be properly handled are as much a big part of franchising as the advertising that makes the franchises explode with profits. These documents are under the watchful eye of the Federal Trade Commission.  While it is easy to see this as yet another way that Big Brother is sticking their noses into our business, the discipline of the FTC in making sure franchise law is observed is a good thing.

You would have to live in a cave not to notice that franchising has taken off as a method businesses are using to expand.  That phenomenon has not happened by accident.  The explosion in the number of franchises being opened every year clearly demonstrates that having the big shots in the government sticking their noses into franchise legal documents has only helped the industry.  The stability and protections that the FTC has brought to franchise legal documents has been a force for good and not evil.

The influence of government in making sure there is some level of oversight over franchise legal documents has created an environment where more potential franchisers feel safe in looking into realizing their dreams of owning their own small business as a franchise of a successful chain. That is because the majority of the requirements that the FTC has imposed on franchise legal documents are put there to protect the individual hoping to buy a franchise. Those protections result in more healthy relationships between franchisee and franchisor which leads to more success for everybody.  That is pretty good work considering it is the government that is involved.

Keeping your franchise legal documents useful.

The most challenging franchise legal documents for you to create are the franchise agreement and the franchise disclosure document.  The franchise agreement should undergo plenty of intense scrutiny by everybody in the game because it is the final step that sets the franchise relationship in stone.  When both parties sign the franchise agreement, the franchise partnership is formal and binding. Money must be exchanged and a franchise must spring into existence.  The franchise disclosure document is used earlier during the time when the franchisee and franchisor are sizing each other up.  It is a FTC mandated franchise legal document that has 23 different areas of disclosure that the franchising company must give up to anyone who is thinking about sinking some serious cash into buying a franchise from them.

The government involvement in the franchise legal documents can throw a cloud over them and make us resent their butting in and making it so difficult to get these documents right. You are smart to engage a franchise lawyer to help research and create all of your franchise legal documents so you know that every “I” has been dotted and every “t” crossed when those franchise legal documents go to the prospective franchise candidate.

But it is also smart to step back, take a breath and realize that these documents are exceptionally important to your relationship with those who will represent your company as franchise owners. So government or no government, put some tender loving care into all of the franchise legal documents in the process because when you make them useful to your future franchise owners, everybody wins.

 

 

By use of a franchise document template, you can get moving creating the documents you need to launch into franchising quickly.

There is no reason to turn your nose up on using a franchise document template to get moving on your plan to franchise your company.  It is true that you can find a healthy assortment of franchise document templates that can be of tremendous help if you are just starting out in franchising.  It is also true that tapping into these templates can save you a ton of money over having a franchise lawyer hold your hand every step of the way.  But those truths do not diminish that the use of a franchise document template is a perfectly valid method for getting oriented to the different documents needed when your franchising program kicks into high gear.

One way to take advantage of what a franchise document template has to offer is to use it as a learning tool. When you get the itch to take your very successful enterprise and franchise it to cause your expansion plans to explode, your curiosity will take over in a big way.  If you start nosing around other businesses that have used the franchise approach to big profits, the first thing you will learn is that documents like the franchise agreement and franchise disclosure documents are going to be absolutely essential to your success.  You will also learn that these documents don’t grow on trees.  You are going to have to create them for yourself so they fit your business and how you want to see your company make the move into franchising.

You can scratch that itch about what these franchise forms are all about by taking a look at a franchise document template or two.  Just a short time looking at these templates will give you a direction to go on in your planning for how you will win big in franchising. The key to going from zero to sixty in starting your franchising empire is knowing what kinds of questions to ask.  A franchise document template will build your check list of questions to ask in a hurry.

Going from a franchise document template to your customized franchise agreements.

You do not have to worry that simply tapping the value of a franchise document template means you will somehow leave something out.  Look on that franchise document template as a starting place, not the end product of your hard work.  Those templates will jump start you in making decisions about how your franchising program will run. They will inspire you to think about what you will expect of your franchise owners and how you will turn them into business dynamos through your support and training programs.

Perhaps one of the most important documents that will evolve from a franchise document template is the franchise disclosure document.  That is because this is publication will be one of the first documents to go to a prospective franchise buyer and it will serve as a document version of boot camp to orient the new franchise owner about your company and about how they will behave and succeed running a franchise of your company.  The franchise document template lays out an example of how to create your FDD as well as how that document will lead naturally into the development of the franchise agreement and eventually your franchise operating manual.

Each of these documents must be customized and tweaked to fit the peculiar personality and business orientation of your company.  That evolution will happen naturally as you begin to bring in franchise gurus and get your best minds working on exactly how the franchising adventure will work best for your organization.

The franchise document template does not replace that evolution process and it does not replace the value of a good franchise consultant or franchise lawyer.  So when you use a franchise document template in its proper place in the process, it can be a tool to supercharge your program and move you along at lighting speed toward great wealth and success franchising your growing empire.

 

Franchise Disclosure Agreement Update Tips

The franchise disclosure agreement is the backbone document of all franchise operations and procedures. It is this document that guarantees your business is managed just the way you want by all of the franchisee partners as well as protects your business identity.

Preparing the franchise disclosure agreement is not an easy task. Apart from the fact that the document must address a lot of important issues, there are also some state and federal regulations that must be covered. This is why even experiences professionals often seek the help of franchise consultants and lawyers when writing or updating their franchise disclosure agreements.

Updating your franchise disclosure documents is also quite challenging. If need to update your franchise agreement, you surely can use some help. Here are a few useful tips that can help you throughout the process.

The most important aspects of updating a franchise disclosure agreement.

• Check federal and state regulations. The first thing to do when preparing or updating a franchise disclosure agreement is to check the federal and state regulations. Although you may still need to get the agreement reviewed by a legal consultant, this will help you write it or update it without missing any important details. There are many laws governing franchise operations. Although they may differ from state to state, in general you will need to update the agreement 120 days after the first year and than annually. Missing the state regulated deadlines can result in big troubles and huge penalties so check these as well.

• Check which parts of the agreement must be updated. There are some parts of the disclosure agreement that you will need to update even if there are no changes in the way your company works. For example you need to update item 2 for any changes in the key management, item 3 concerning litigation, item 4 – bankruptcy. You need to update the chapters concerning your opening costs based on recent expenses, the chapter regarding payments to suppliers, items regarding trademark and infringement information and the items concerning lists of existing outlets and terminations. All franchisee disclosure forms should also be updated.

• The annual audit. Each update should be accompanied by an annual audit. Call your audit partners as early as possible as leaving this for the last moment usually results in missed deadlines.

• Take advantage of the update. Updating the agreement is a real burden but it is also provides a great opportunity to review closely some of your operations. You are digging in forms and documents so you can easily go through all your franchise units contracts and check if any updates are needed there too. You can do the same with contracts you have with suppliers or other business partners. While updating the trademark section of the disclosure agreement, check the documents that concern protecting your grand names and logos and file or renew any applications to protect existing or new logos, brand names, trade marks or patents.

Franchise Offering Document System

So you have sold your first franchise and are hungry to sell more. Better slow down, this is the number one fault of most franchisors is to start taking on more franchisees than they can handle. You need to ensure a controlled growth and only take on those franchisees that are a definite fit rather than the one who can simply afford the fees.

Now, getting all of this down on paper is the other portion of the business some don’t recognize. Like most things, the excitement is 5% of the sale, the other 95% is the paperwork involved. A Franchise Document System, or a Franchise Operations Manual, is easy enough to create and consists primarily of an exhaustive index of material numbered to what each form, policy or contract does. A franchise system may have more than a dozen policies, a dozen or more forms and quite a few booklets on how everything should be run. Take a look at our Operations Manual for an example of a professionally made franchise document system.

Simplify your forms and policies by giving each of them a number. You can start with the employee policies labeling them as such: EMP-1001 – So this would be Employee Form 1001 – Vacation Request Form
Having all of this in order save a lot of time, especially when a franchisee requests this form if they have lost it or need more copies. These forms, policies, procedures and contracts should also be date stamped so you know the last time they were edited.

Now that you have your paperwork in order, your franchise locations will be setup in accordance with the forms they need. There may be some states that only allow certain stipulations in contracts and you may only have a handful or more franchisees in that state. The simplicity of a Document System will ensure that all of your paperwork is in pristine order and can be called upon with the click of a mouse.

Franchise Territory Agreements

Franchise territory agreements are a necessity for the franchisee and the franchisor. The agreement allows the franchisee to operate within the confines of a certain market knowing the franchisor will not sell that market to any other. As well, the franchisee is usually given every right to purchase other available markets. The way in which this helps the franchisor is that it allows them free reign to bring in the franchisees they need to fulfill market demand.

What often happens in some situations is the franchisee believes that the market they “want” to develop in is often available and may begin to work that area. This will lead to conflict as the franchisor may be pursuing leads in that area to develop in. If the franchisee fails that market it typically takes some time to rebuild the exposure for the franchisor.

Having a contractual obligation to perform is one thing. Having rules set forth from the very beginning is another. The franchise contract is a great set of rules for both franchisee and franchisor to live by and as a franchisor you must adhere to these rules as strictly as possible, the same being said for franchisees. Your franchise territory agreement will assist in mapping out the areas with which both parties may work. If you are a new franchisee, ensure you are afforded the opportunity to build in your area or if an older franchisee – you may wish to switch markets or even buy more. Whatever the reason, read your territory contract word for word. The franchisor should have all paperwork up to date as some markets may no longer be available. Maintain good contact with each other as well as keeping your paperwork up to date will aid both parties in settling franchise limitations and agreements. The best way to handle territory agreements is to have them digitally stored so they can be immediately dispatched to the proper party.

Franchising and the Legality of Oral Contracts

It used to be when one person shook hands with the other this formed a viable contract. As most people tend to believe that this age-old method still applies may be in for quite a shock. More often the “handshake” or “verbal commitment” is good enough for most people… when the deal is for less than a few dollars or a promise to help move furniture. As people’s business practice evolved so to have the business instrument that guides both parties. That business instrument being a physical contract whereupon both make their mark to agree to terms of the “deal”. When it comes to franchising a business or buying a franchised business you’ll find that everything will be in the physical form.

An oral agreement may work for some franchisees but the promises placed must be produced or problems arise on running a successful and financially viable franchise. What one considers to be an oral arrangement most courts would expect you to show proof of the arrangement. Will you win in court? That all depends on your evidence, and really, how often do you record your conversations? As well, some state and county courts do honour oral agreements with a limit on monetary value, say less than $500 USD.
So as a franchisor or a franchisee the rules must be applied that anything that is needed to be done by either party must be written if it is to hold any weight with a court of law. An agreement can be a standard form but it must be approved and signed by both parties which then signify both parties understand what they and the other party must do to fulfill the contract.

Franchise paperwork is rather lengthy and often cumbersome when it needs to be edited as the franchisor may have to deal with rulings from several different states. This contract paperwork must always be up to date and available as you never know when a new franchisee will sign on to represent you.