Here is a link to a great post by the FTC – the Federal Trade Commission, FTC-Buying a Franchise. It is the organization that governs the fracnhise industry. It is worth the read as they are non-biased. It is loaded with the kind of information you need to ask the intelligent, probing questions before investing your money. Pay special attention to  section on Franchise brokers. Many people erroneously think they are going to save time/money by going directly to the franchise. It is important to remember that that would be the same as only going to one homeowner and expecting them to tell you why you may not want to buy their house. An independent broker – like The Franchise Stop LLC works with many franchises. Our goal is to meet your needs. It really makes no difference to us which franchise you ultimately choose to partner with so long as you have full understanding and clear expectations. Going straight to a specific franchise though and you will get the sales pitch as to why they are the greatest. You do not save money because a good broker does not charge you. We get paid a commission same as a real estate agent.

The most common type of franchise  in the U.S. is a business format franchise. Simply put it is the type of structure where the franchisor provides for the franchisee a complete plan (format) for the management and operation of the franchised business. The plan spells out completely in a step by step format the how the franchise works and the task involved in successful management of the business. It delineates how they are to be done, when they are to  be accomplished and by whom in order for the franchisee to be successful. The plan tries to anticipate and account for most management problems or issues. The system provides  answers to a majority of issues that could come up along with potential solutions.

Major advantages of business format franchises?

1. The system has been developed
2. The systems has been tested and refined
3. The system has been proven to work
4. The franchisee has use of the trademark
5. The franchisee has access to the combined experience of the franchisor and other franchisees thereby increasing the likelihood of success
6. As more franchisees expand into more territories there is even greater name recognition

1. Is franchising right for you?
2. What type of ownership is appropriate for your situation?
3. How can you find out all about the franchise you might be interested in purchasing?
4. Works with hundreds of pre-screened franchises
5. Saves time and money.  He/She knows what the requirements are to qualify for a franchise and can help determine which franchises you may qualify for.
6. Goal Defining. What do you want to accomplish and what franchise can help you get there?
7. Thinking outside the box when considering what type of franchise you should consider.
8. Understanding your financing options. How will you fund your new venture?
9. Avoiding “hype”, “short term trends”, and franchises that don’t make sense for you.
10. Staying on track and following a process.

Step 1 – Contact Us

Take the first step towards owning your own business fill in the Request Info in our website. Your confidential contact information will be reviewed by our staff to understand your current level of interest and to provide you the best opportunities available,  that match your preferences and objectives.

Step 2 – First Appointment

One of our consultants will contact you to setup an appointment to discuss your background and goals in finding the right franchise for you. This may take about an hour and can be done over the telephone. Understanding your particular goals and needs will allow us to find the best opportunity for you. We will also need you to fill in a pre-qualification questionnaire that will help us get more information on your background, employment history and financial situation. We will set a follow up an appointment to present you with opportunities that fit your requirements.

Step 3 – Research

Based on the information that you provide us including your experience, stated goals and needs we will research available franchises and match their models and requirements with your goals and preferences. With over 1500 franchises available in the U.S. today, our goal is to identify for you with 3-4 franchises that match your requirements so that you can then find “the” right franchise for you.

Step 4 – Presentation

We present you with the opportunities that we have identified during our research. If any of the opportunities are of interest to you, then we will arrange an introduction directly to the representative of the franchise.

However, you will need to complete and submit a confidential questionnaire, which will be supplied to the Franchisor or Franchisors of interest. Franchisors want to know that: you are financially qualified to purchase their franchise your timeframe to buy is within reasonable limits your partners or family are in complete agreement with you buying a business

This does not obligate you in any way. It simply shows the Franchisor that when you find the right opportunity then you are capable of acting on it and buying it. During step 4 (Presentation) we will also try to clarify your goals and needs as identified in Step 2, and if necessary repeat Steps 3 & 4 multiple times. This is a self-correcting process and it may send us several times throughout steps 2-4 of the process. Please keep in mind that the Franchise Consultant is presenting you opportunities, but you must make the decision that is best for you and your family. Therefore, refining the criteria for the best opportunity for you is an ongoing process.

Step 5 – Introduction to Franchisor

For each of the opportunities that you have an interest, we will facilitate an introduction to the Franchisor. The Franchisor will send materials to help you become acquainted with their franchise opportunity. They will present to you their particular process and send you the Franchise Disclosure Document (FDD), which is a disclosure document for their franchise opportunity. The FDD will have a receipt, sign it and return to the Franchisor immediately.

Step 6 – Review of the FDD

We will discuss the items that are contained in an FDD; specially those items that you should pay close attention. You should then review the FDD in complete detail, writing down any questions or concerns for discussion with the Franchisor. The FDD will contain a list of franchisees and contact information.

Step 7 – Call Franchisees

The Franchisor should provide you a list of several franchisees for you to call to ask questions about the franchise opportunity. Obviously, the Franchisor is going to give you a list of franchisees that are successful and have positive things to say about the franchise. You should contact these references and ask them why and how they became successful. Then you need to determine if you can do the same things that they did to be successful.

Step 8 – Consultation with Attorney and Accountant

You should always consult with an attorney and an accountant before making a decision. It is important to insure that both people have a good background in franchising. If they do not, then the process may be more costly and time consuming while they do their research.

Step 9 – Attend a Discovery Day

Most franchisors have a Discovery Day, where they will invite you to their location. You will not only get crucial information for your decision, but will get to meet the staff that will be providing your initial training and continuing support.

Step 10 – Decision Time

You have taken all of the steps up to your Decision time. Congratulations if you have decided to buy a franchise. You have become a “Frantrepreneur”, a cross between a traditional entrepreneur and a modern franchise owner, a person that possesses the desire to be a business owner, without having to reinvent the wheel. Now, you will be able to own your business while minimizing risk by buying a proven business opportunity. We wish you well in your new endeavors.

Franchising or Licensing?

Franchising and Licensing as a means of expanding a business are often confused with one

another. However, franchising and licensing come from two distinct areas of the law.

Franchising is based on Securities Law and Licensing is a form of Contract Law.

What does this mean to the non-lawyer?

It means that if one takes up franchising as a means of expanding a business, then compliance

with the franchise laws, like the securities laws, requires registration of the franchise in the

applicable jurisdictions. On the other hand, licensing is merely a contract between two

independent parties.

Why Do Franchises Have To Be Registered?

In general, the primary difference between a license and franchise situation is the amount of

control that the franchisor or licensor exercises over its franchisees and licensees, respectably.

A franchise has to be registered, because the control by the franchiser over the franchisee is

what is supposed to make the money for the franchisee; i.e. if you do what the franchiser says,

then you will make money.

Buying a franchise is like buying a security; i.e. the control over whether or not the buyer of

the franchise or security makes money is in the hands of a third party; for the security situation

it is in the control of the people who operate the company that issues the security, and for the

franchise the control is in the franchiser who dictates how the franchise operates to make

money.

Thus, the government requires disclosure of the risks to the potential franchisees just like the

government requires a disclosure of the risks in buying a new stock issue. There are

government requirements of registration of both franchises and securities for the same reason;

i.e. to protect the public and give the public full disclosure of all risks before

purchasing.

One Thing You Better Know: There areTwo Types of Franchises and One is Very  Bad

In practical terms there are two types of franchises:

(a) intentional franchises and

(b) unintentional franchises.

The first type is the situation where someone wants to expand their business and decides to use the franchising mechanism to do it.

The second type is the predicament where in the effort to expand the business; franchises are inadvertently created (sometime called Distributorships or Licenses). These hidden franchises are often spawned from a poorly advised and drawn distribution agreement, license agreement, and other marketing formats. These are the franchises that get people into trouble!

The problem is that both types of franchises have to be registered in the appropriate jurisdictions, and the consequences of failing to do so is often substantial civil penalties and/or criminal punishment.

So this area of the law is nothing to “trifle with”, so to speak.

Licensor’s beware! If you go the licensing route it is extremely easy for a licensing format to slip into an unintentional franchising structure either by poor draftsmanship of the licensing documents and/or the inappropriate use of business applications in company operations. If a licensor slips into the franchise arena, he needs to either (a) immediately comply with franchise laws or (b) re-adjust the operations to comply with the licensing laws and avoid the franchise laws.

THE THREE-LEGGED FRANCHISE STOOL

The Legal Definitions of a Franchise So Everyone Can Understand It

You have to know what franchising is to know how to lawfully avoid franchising, and you have to know how to avoid franchising to create a licensing or other mode of business expansion. Consequently since we have been talking about franchises and need to knowabout them, we better make it understood just what constitutes a “franchise”.

First, I have to tell you the various States and Federal definitions of a franchise are pretty clear, but the application of the facts to these definitions is highly mercurial. You may have trouble ever getting any two franchise lawyers to agree on whether or not franchise law compliance in various situations has been met.

Federal Definition of the Federal Trade Commission

THREE ELEMENTS. The FTC “Franchise” definition has three key elements:

(1) The Franchisee’s goods and/or services are to be offered and sold under the trademark of the Franchiser

(2) The Franchiser requires the franchisee to make a minimum payment of $500 or more, and

(3) The Franchiser maintains significant control of, or provides significant assistance to, the franchisee’s operation methods.

Common Name Leg. The element (or leg of the three- legged franchise stool) of the use of the trademark or common name is clear for the purposes of this discussion. You want your trademark or common name to be the rudder that moves your business expansion.  “McDonalds” is the most famous example of the common trademark name of franchises.

Fee Leg. The element (or leg) of payment of a fee means that franchisee must pay the franchiser $500 or more as a condition of obtaining the franchise or of beginning initial operations.  Any payments made at any time before or within six months after beginning operations shall be aggregated (combined) to determine if the $500 element is present.

These payments may be a requirement of the franchise agreement, or a secondary agreement (e.g. agreement to purchase goods only supplied by franchiser.).

Operations and Marketing Control Leg. As to the element (or leg) of “significant control or assistance in franchise operations or marketing”, the key word is “significant”. Franchiser actions that trigger the application of the concept of “significant control” are (for example): operations manuals, site approval, personnel policies, accounting procedures, co-op advertising, operations training, etc. If you are operating a Distributorship or License arrangement that falls into the above 3 “legs” then you are actually offering a Franchise without the proper documentation and registration.

The States’ Definitions of Franchise (The Three Categories)

The FTC basically sets a minimum standard of what a franchiser must disclose to a prospective franchisee. Then it leaves it up to each State to add any laws it deems necessary to protect the potential franchisee. Thus, each State has its own franchise laws which include the definition of franchise that must be followed.

I have used three categories to describe the various types of franchise laws of the States.

They are: Category I. In California, Illinois, Indiana, Maryland, Michigan, North Dakota, Oregon, Rhode Island, and Wisconsin, a franchise is defined as having three essential elements: 

(a) A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchiser

(b) the operation of the franchisee’s business is substantially associated with the franchiser’s trademark or other commercial symbol designating the franchiser or its affiliate and

(c) the franchisee is required to pay a fee.

Category II. Hawaii, Minnesota, South Dakota, and Washington have a broader definition of franchise which include three primary elements:

(a) Franchisee is granted the right to engage in the business of offering or distributing goods or services using the franchiser’s trade name or other commercial symbol or related characteristic

(b) franchiser and franchisee have a common interest in the marketing of goods or services, and

(c) franchisee pays a fee.

Category III. Virginia and New York are different than other States. New York, for instance, the

(a) franchiser is paid a fee by the franchisee, and

(b) is either essentially associated with the franchiser’s trademark or the franchisee operates under a marketing plan or system prescribed is substantial part by the franchiser.

As you have probably determined, this type of situation can get sticky. It is often times not you that decides whether your arrangement is a franchise, but rather the law that decides.  Many distributorships & licenses are in actuality operating as a franchise by the above-described definitions.

1. Are you credible?

Credibility is reflected in a number of ways such as: size, number of units,
years in operation, look, public awareness, profitability, strength of management, public
satisfaction, etc

2. Are you sufficiently different?

This comes in the form of quality and/or need of the product
or service, a reduced investment cost, a unique marketing strategy, target markets, a great
system, a unique name and/or brand, etc.

3.Can you teach your system to others?

Generally speaking if the business is so complex that it cannot be taught to a franchisee in 3 months, it may be difficult to franchise

4. Can your business concept be adapted from one location to another?

 Issues such as state laws and regulations, consumer tastes or preferences, unique locations, or the talents of the person behind the concept should be considered. Another factor of adaptability is the anticipated size of your franchise system (over 50% of all franchised companies have 50 or fewer franchisees–you don’t have to have thousands or even hundreds of franchises, and don’t have to be national or even regional).

5. Is your system proven?

In other words, your system works, and while it may need to be refined, it is a successful prototype. This does not mean that you have to have more than one location. Many people think they have to open more outlets and prove them before they can franchise. This is not true.

6. Is your system documented?

While all successful businesses have systems, not all are
adequately documented.

7. Is your system affordable?

Affordability reflects a prospective franchisee’s ability to
purchase your franchise, and not just the actual cost of the franchise.

8. Will your franchisee receive a return on investment?

This is the real acid test of franchisability. A franchise must be profitable, but profitable after your royalties are paid. The income a franchisee earns can also be factored in. Profitability is always relative, and must be measured against other investments of comparable risk that compete for the dollar.

9. Are there market trends and conditions that will affect your franchise?

While not an indicator of franchisability, trends are a key to planning and timing. Will you miss out by waiting?

10. Do you have the capital to franchise?

 While franchising is a low cost means of expanding a
business, it does cost. You will need the capital and resources to develop a franchise program.

11. Do you have a commitment to relationships?

Successful franchisers focus on building
relationships with their franchisees that are mutually rewarding. Strong relationships enable you to award franchises more readily and introduce needed changes into the system more easily.

12. Do you have the strength of management?

This is probably the single most important component. A single most common contributor to the failure of franchisers is understaffing and
lack of experience.

How did you do? Can you say that your business can be franchised? If yes, then you should ask
yourself the next question: Should I franchise my business? This question can only be answered after you understand what is involved in franchising your business, such as the legal
requirements, the operational requirements, the marketing and awarding of franchises and the
support of your franchisees.

Statistics are interesting things that can help justify almost whatever position you want to take. However, the statistics below represent some pretty powerful reasons to look seriously at the franchise opportunities. Even when growth is slow the success of franchises remains about the same – which is overall better than non-franchised business.

Franchise Alliance (whom the The Franchise Stop is a member of) is the source for the consolidation of the following statistics. Franchise Alliance supports one of the largets broker networks and has relationships with more franchises than any other broker network.

Industry Statistics

 Additional information can be found  by reading the  2010 Franchise Business Economic Outlook

The time has come and you have decided that you are ready to own your own business. But you still have many questions and are not quite sure where to turn to for the answers you need. Well you have come to the right place.

The Franchise Stop a member is here to make sure that your experience in investing in a franchise is handled in a professional, educational and as stress free manner as possible.

We understand that you may have lots of questions – How much does it cost? How much can I make? Do I need to have any experience? Is it hard since I have never done this before? How much can I make? Do I have to pay you anything? Why should I use a broker vs going directly to the franchisor? How much can I make?

These are all great questions that we have been asked before among others. WE have the answers for you if you are committed to the process. If you have not yet decided whether you want to be in control of your own life and never have to worry about getting laid off, downsized etc. or what the rest of your life will look like, then take some time and educate yourself here at our website by clicking here.

Remember that if you want to change the direction your life is going you have to change what you are doing with your life. If you are in a dead end job you will never move up until you change jobs. If you have lost your job and have no opportunities on the horizon then you have to make an opportunity for yourself.

Once you have decided that yes you are going to own your own business we can help you make the right decision on the right kind of business for you.

If you are truly ready to  grow your business ….

Our team of professionals can save you thousands of dollars during the franchise development process because we partner with you step by step and our profits are tied to your success. Our process is simple – 

1. Provide the legal services required,
2. Provide the operations manual from which your franchisees will learn the business and provide and
3. Implement a sales and marketing plan to help bring you to the market successfully. 

What kinds of people make the best Franchisors? People just like you - who have worked hard at growing their business and have a passion for seeing it continue to grow and helping others to succeed through their past success. 

So are you committed to taking it up to the next level? If you are then you owe it to yourself to talk to us. There is lots of competition out there and many are good companies but no one can provide you the kind of service you deserve at the cost you want to pay. 

As a professional in your field you understand how important it is to get the right people involved in a job at the right time. Well so do we!

If the time is right for you to really get your business of the ground it is time that you called us. 

Contact Lou todayat 877-611-4192 or email Lou at lbrifman@thefranchisedevelopmentgroup.com  and request a meeting to discuss your opportunities!

Article Advantage of Franchising