It is good to know what is in a typical franchise agreement so that you know what to expect when the time comes to seal the deal.

There are elements of a typical franchise agreement that pop up in every franchise document that becomes part of a franchise relationship.  What shows up in a franchise agreement can vary widely because of the market niche of the business.  After all, how a fast food franchise will run is going to be outrageously different than a franchise of tax preparation specialists.  Differences can also spring up based on the goals and quirks of the franchising company.  While most deviations from a typical franchise agreement based on “culture” issues or how a much a company pampers their customers are spelled out in the disclosure document or the operations manual, there still can be some huge differences from one franchise document to the other.

Still in all, there are elements that will always pop up in a typical franchise agreement that you can look for. When it gets down to brass tacks, a financial agreement is a legal document that is binding on both the franchising company and the small business person sinking his or her life savings into an exciting new franchise.  The real binding part, naturally, is the money.  The costs of what you will have to ante up to be a proud owner of that franchise will be laid out so that when you put your autograph on the last page of a typical franchise agreement, the next documents you sign may be a series of checks to the franchising company.

The boundaries of time and space are always important in any typical franchise agreement. In fact, if there is not language in the document you are about to commit to that spells out the territory and term of the franchise agreement, send that dish back to the kitchen because it isn’t cooked enough.  When you sign a deal to build a franchise or several franchise outlets, you cannot just pop them up anywhere in the world.  You don’t need that kind of headache.  The zip codes that are yours and yours alone from the franchising company’s point of view must be in a typical franchise document.

You don’t work for the franchising company but you do answer to them.

The typical franchise agreement will also be able tell you to the month and the day when the franchise agreement will expire.  Don’t see that as termination date.  See that as your chance to decide if you want to move on or for the franchise company to do a gut check to see if they want to have you run their franchise some more.  Unlike a marriage license, a franchise agreement has an exit plan so make sure that termination drop dead date is there.

A third big time category of agreement that should be in any typical franchise agreement has to do with when, who and how you must salute the flag of the franchising company.  Franchise operations from one unit to the next are almost always conspicuously identical.  You don’t go to one McDonald’s that has Ronald outside and another that has a giant beaver for a mascot just because the franchise owner likes beavers. No, it is Ronald in every McDonald’s from Peoria to Paris.

As the new kid on the block in the company’s franchising empire, be sure you understand how you must manage the franchise. Understand the standards of quality and customer service and all of the other controls that the franchise company insists upon to make sure that when you put their name on your building, they will like what happens inside.

You do not work for the franchise company but to be a member in good standing, you must live up to the controls that are in any typical franchise agreement. When you understand those rules for living and you can run a successful franchise of a very successful chain, the wealth and fun of running a hot small business will make you glad you checked out what you were signing up for when you sealed the deal in that franchise agreement and started your new and exciting life running the show.

 

 

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.

 

 

Be sure you tap into the FDD template when you start to organize your franchise disclosure document because it can help you get it right the first time.

In the world of franchising, the FDD template represents one of the real lifesavers.  FDD stands for franchise disclosure document and it is no picnic to create one when you first start putting together your plan to franchise your business.  It has not been that long since the FDD template replaced the Uniform Franchise Offering Circular. This important document is more than just a friendly greeting to those who are thinking about buying a franchise from you.  It is a heavily regulated and detailed disclosure document that lays out everything from soup to nuts about your business and what the franchise relationship will look like when the dust settles.

Most companies that set out to create franchises of their business see the creation of the franchise disclosure document as one of the real challenges of the quest.  That is because it can be tedious and tricky to get it right. Using a good FDD template can keep you from stalling out while you put together a disclosure document that not only satisfies the government watchdogs but serves to help your future franchise money making partners as well.

When you download the FDD template, be prepared for a project that is going to take up some serious time and energy.  A typical FDD template will detail what goes into the FDD document through 23 different chapters and each chapter will come with charts, illustrations and explanations not only of the kind of information you must disclose to a potential franchise owner in your business but how you must disclose it. Be sure you step through each section of the FDD template with patience and virtually superhuman attention to detail because the FTC is all over this document.

Take the FDD template and run with it.

While much of our discussion about the FDD template might put the fear of god into you about completing the franchise disclosure document, take heart.  It is a step in franchising your company that is necessary and it is one that every successful business that has launched into franchising completed correctly as well. If they can do it, you can do it too.

Instead of viewing the use of the FDD template as a big nuisance, think of the value this document will have for your future franchise owners.  The franchise disclosure document goes to the potential franchisee well in advance of the franchise agreement.  By doing a good job of packing that document with every bit of minutia about your business and about what it will mean to franchise from you, you shift the responsibility for that information from you to the franchise applicant.

Moreover, the FDD template will enable you to do a great job with the franchise disclosure document which will result in better educated franchise owners.  Smarter franchise owners means more productive franchise owners which means partners who are generating large piles of money, much of which comes your way.  So give the FDD template your best effort, not only because you have to do it to stay kosher with franchise law but because you will have a higher quality franchising program as a result.

 

Developing a franchise agreement checklist should be part of your homework before you start accepting applications from people who want to own a franchise.

A solid franchise agreement checklist is one of those great lists that can really save you from a lot of heartache along with legal and financial problems.  Some people are list keepers and others are not.  But a franchise agreement checklist is much more important than that “honey do” list that hangs on the refrigerator at home.  It is a way for you to “check out” applicants for franchising before both parties sign that franchise agreement and you are business partners through thick and thin.

At the top of the list of things to have on your franchise agreement checklist is financial viability. Viability is a 50 cent word for finding out if this franchise applicant has a leg to stand on financially.  Starting a franchise is no place for someone who is in a rebuilding year financially. Those who make it to the finish line and invest in building one of your franchises must have a credit rating to die for and plenty of financial resources.  That doesn’t mean he or has to have hundreds of thousands laying around in the bank. But it does mean that to make the cut on your franchise agreement checklist, there must be an ability to generate income to afford the franchise fees and the start up costs of getting that new franchise on its feet and running like a top.

Moving down your franchise agreement checklist and you should have several pages of questions meant to check out that the applicant for one of your coveted franchises knows the nuts and bolts of how to run a business.  Clearly you do not want someone to buy a franchise who never taken a business from a start up to a booming enterprise. Buying a franchise is for those who are already a success as a way to expand their ways of making even more money.  So check out how well their current business or businesses are holding up as part of your franchiseagreement checklist and the ones that make the cut will be the good ones.

Grading the Franchise applicant’s homework.

It is not entirely accurate to say that franchising a business is not for rookies because everybody has to start somewhere. But it is accurate to put on your franchise agreement checklist that before the ink is dry on that binding and legal franchise agreement, your franchise applicant must know the ropes of franchising.

If the business person who wants a piece of your success is already running a franchise or two, the success of those outlets is a resume in itself. Just as you check out the business savvy of the individual in previous sections of the franchise agreement checklist, check out how well they have done running a franchise before.

If this is the first franchise purchase for a hot prospect, they should be ready to gain an encyclopedia of information about franchising from the various franchise documents such as the franchise disclosure document and the franchise operating manual.  Don’t be shy about checking out the applicant to make sure that their level of knowledge will make them able to hit the ground running when they buy a franchise from your company and turn that franchise into a money making machine. If they can do that, you want them on your team and their score when you finish the franchise agreement checklist will be very high indeed.

 

Buying into a retail franchise agreement can turn into a sweet career so follow the advice of experts to get it right the first time.

If it seems that people who operate from a retail franchise agreement dominate the world of retail sales, there is a good reason for that. The statistics gurus tell us that one of the best ways to get into a successful small business retail outlet and make a go of it is through franchising.  So before you take the plunge and buy into your own retail franchise agreement, research the advice from the old hats at the retail game so that when you fire up your own retail outlet, your odds of success are huge.

There is one simple word of wisdom that anyone getting ready to get out there and work their tails off at a new business should follow and it applies very well if you are about to start working on a retail franchise agreement. That word of wisdom is that when franchising a small business,  be sure you love what you do.  Building a franchise empire from the ground up means hard work and long hours. If you truly love the line of retail you are going into, the hours will fly by and you will wake up excited to go to work.  That is the way it should be.

Once you know that you were born to have a retail franchise agreement of a specific niche, make sure that there are great franchises for sale out there that you would want to invest in and build.  Never seek out a retail franchise agreement from a chain that you are not excited about linking arms with as a partner.  But take that caution to the next level and do your legwork to make sure that there is an urgent demand in your community for that store. Where you open the outlet that is the result of you retail franchise agreement will make all the difference in how fast you start socking away the huge profits you dreamed about before starting your business.

You have the market and you have the location but now what?

If you have found a market niche that you would love to work 20 hours days to conquer and you know there are customers falling all over themselves to buy from you and you have that retail location to die for, a huge part of what it will take to make your franchise a huge success is done. But buckle down because there is still work to be done before your retail franchise agreement translates into big money.

While the company who is ready, eager and willing to sign a franchise agreement with you will provide tons of support, you must build much of your infrastructure with your own sweat equity to make sure your retail franchise agreement is an overnight sensation. Financing is a big deal because it takes some serious money to land a money making retail franchise agreement.  You will also need to sign some leases, arrange for insurance, bonding and tap the minds of a few franchise and tax lawyers to make sure you are ready to run a kosher operation that lives up to that retail franchise agreement well.

But after you have signed all the legal contracts, hired on a crack team of retail go getters and are trained to the eyeballs to make big sales week after week, the time will come when that retail franchise agreement results in a gleaming new retail location that you can call your own.  The sense of pride you will have is a big reward. But the reward you will thrill to the most will be the big bags of money you haul to the bank because of the prosperity that retail franchise agreement has brought to you, your staff and your family.

« Previous Page