See larger image The Franchising Boom: Why Right Now is the Best Time to Expand Your Business (Paperback) By (author) C K Quarterman List Price: $9.99 USD New From: $9.99 In Stock

When deciding to franchise your business, the checklist below will give you a brief overview of the important factors affecting your business decision.

• Growth & Expansion – Is your business established and successful?

• Profitability – Is your business making a profit, and can you predict a profit in the future?

• Replication –Can you teach the franchisees how to run your business? Can your business system be duplicated?

• Systems – Can the daily operations of your business be translated into an Operations Manual?

• Selling Point – Can your business concept be effectively sold to potential franchisees?

• Unique Selling Proposition – Do you have a point of difference from your competitors?

• ROI – Will the franchised business allow an adequate return on investment for the franchisee?

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Get a COMPLETE solution for franchising your business. Guides! operations manual templates, and FDD’s.

Franchising your business is a proven rapid way to growth. Most businesses take a proven profitable business and try to replicate its success. When you own or start a franchise you are in business for yourself.

A franchise business is a business in which the owners, or franchisers, sell the rights to their business logo and model to third parties, called franchisees. Franchises are an extremely common way of doing business.

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Related articles

• 2012 Franchise Disclosure Document (thebusinessstartupkit.com)
• Master and Area Development Agreements (thebusinessstartupkit.com)
• Franchise Your Business (thebusinessstartupkit.com)
• Create a Pilot Business Before Franchising Your Business (thebusinessstartupkit.com)

See larger image The Franchising Boom: Why Right Now is the Best Time to Expand Your Business (Paperback) By (author) C K Quarterman List Price: $9.99 USD New From: $9.99 In Stock

Franchise fees are typically paid for the use of the franchisor’s “system”. Fees vary a good deal from franchisor to franchisor.

Initial Franchise Fee

There is usually a one-time initial franchise fee as well as a royalty, or ongoing fee. The royalty fee is usually a percentage of the gross sales from the franchised business, but in some cases may be a flat fee paid monthly. The initial franchise fee varies a good deal from franchisor to franchisor. The initial franchise fee covers the cost of franchise development, and recruiting.

Royalties

Royalty fees will vary from 5 percent to 10 percent of gross sales. Service type franchises tend to have higher royalties than do retail franchises.  The more well know the brand the higher the royalties will be.  Royalties allow the franchisor to provide ongoing service and recoup their investment.  Royalties need to be affordable for the franchisee but large enough for the franchisor to maintain and grow market share.  A flat fee royalty is sometimes used as it is attractive to the franchisee. Product fees are another type of royalty used at times when products are distributed by the franchisor. Royalties are usually non-negotiable and consistent throughout the system.

Advertising Fee

Also, there is a fee for advertising which the franchisee pays allowing the franchisor to advertise nationally or regionally, and promote the brand.  Advertising fund fees will vary from 1 percent to 4 percent of gross sales, and in some cases is a flat fee.  Advertising fees are calculated in the same way as the royalty’s fee.  The advertising fund fee is not considered income to the franchisor but rather collected “in trust” to promote the brand with advertising that might have been affordable otherwise.

Be sure that all advertising complies with consumer protection laws. The FTC has recently posted guidelines for online advertising.  They are well written and can be accessed from their website:      http://www.ftc.gov/bcp/edu/pubs/business/ecommerce/bus41.pdf

Note: All franchise fees should be debited electronic fund transfer! Don’t rely on your franchisees to send in their fees, debit them weekly or monthly.

Renewal Fees

There will typically be some fee when it comes time to renew the franchise agreement, this will typically be called a Renewal Fee.  This fee must be defined in the franchise agreement.  The renewal fee is usually a percentage of the franchise fee, and is usually between $3,000 and $15,000 paid in full at the time of entering into the new franchise agreement for the renewal term.  The renewal fee is thought to represent the opportunity cost lost by not awarding the franchise territory to someone else at the current initial franchise fee.  A low renewal fee could show that the franchisor values its franchisees and retaining their relationships verse placing a high value on its brand.  Many franchisors will write in the franchise agreement that upon renewal, there will be a requirement to upgrade or modernize.  Disclosure documents are not usually required; if there has been no interruption, or material change in the operation of the business.

Terms

All franchise agreements have a fixed term. The length of the term will vary from franchisor to franchisor, but the length of the term will be specified in the franchise agreement.

Usually the term is 10 years, but sometimes as long as 15 to 20 years. The term should be long enough for the franchisee to have a return on his investment.  At the end of the term there is usually an option to renew, if the franchisee meets certain renewal conditions.

A typical statement used in a franchise agreement would read something like this:

The Franchise is granted to you for a term of ___ years (00) from the date that this Agreement (the “Agreement”) is executed. It is subject to earlier termination as herein provided.  It will automatically terminate on the _______ (00th) anniversary of the date of this Agreement, subject to your right of renewal as herein provided.

Disclosure Document

A Disclosure Document and Franchise Agreement are needed to Franchise. The FDD or Franchise Disclosure Document has replaced the older UFOC. The Franchise Agreement is the legal agreement between the franchisor and franchisee.

It stipulates the assigned franchisee territories, as well as all fee structures, that have to be paid. It also lists the obligations of the franchisee and the franchisor.  Most disclosure documents and franchise agreements have been drafted carefully to favor the franchisor.  They are the cornerstones of the franchisor – franchisee relationships.

Disclosure documents are a summary of the information needed to be disclosed, or “revealed” to the prospective franchisee in for the franchisee to make an informed decision concerning his investment in a franchise. Some states called, “Registration States” control franchising through their respective securities departments.  In the USA the Federal Trade Commission and their subsequent rulings control franchising.   In Canada, a disclosure document to is only required in the provinces of Alberta, Ontario and PEI.  The disclosure document must be provided 14 days prior to the potential signing of any franchise agreements.

Franchise Agreements

Franchise agreements will map out the protected territories of the franchisees. The franchise territory may be defined by distance, zip codes, or even cities.

The boundary lines are stated in the franchise agreement and usually will disallow the sale by the franchisor of any other franchise in this area. The franchise territory protects the franchisee from sales being made by other locations offering the same products and/or services as the franchisee.  In some franchise agreements it may be stated that the territory is non-exclusive, if this is so it should be clearly so stated.  It will be a source of litigation, if not clearly stated.  It is important to note that franchisors are becoming more reluctant to grant exclusive protected territories.  Some franchisors will right in a “Right of First Refusal” allowing the franchisor to open another franchise location within the franchised area, if provided the first franchisee is given the opportunity to open the second location and refuses to do so.

What if the franchisee is referred business outside of his territory?  This is usually addressed by the franchise agreement stating that the franchised territory is the franchisees primary market of responsibility and the franchisee may only advertise in the defined territory.  Otherwise, the franchisee is allowed to make sales based upon previous customer relationships or even referrals. Sometimes this definition is expanded to include sales generated by networking or even advertising done from within the franchisees franchised area.

It might be mentioned that there are sometimes sales quotas needed to maintain the franchise grant.  These are written into the franchise agreement; if quotas are not met the franchisee looses the franchised area, or perhaps the franchise itself.

As a word of advice, I would advise the new franchisor to divide territories by zip code areas. This is easily accomplished using a zip code data base, which can be acquired easily. Some franchisors will use DMA’s and complicated methods of granting territories or “franchised areas” but the task need not be complicated. The new franchisor can track territories using a simple spreadsheet.

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Related articles

• 2012 Franchise Disclosure Document (thebusinessstartupkit.com)
• Franchise Your Business (thebusinessstartupkit.com)
• Franchise Operations Manual is the Corporate Guidebook (thebusinessstartupkit.com)

See larger image The Franchising Boom: Why Right Now is the Best Time to Expand Your Business (Paperback) By (author) C K Quarterman List Price: $9.99 USD New From: $9.99 In Stock

We supply attorney written, high quality customizable Franchise documents, Templates, and Franchise Operations Manuals.

Within franchising, there are three different expansion formats used by franchisors. A Multi-unit franchisee is one who has multiple single-unit franchise agreements. He may also hold an area development agreement or master franchisee agreement.

An Area Development Agreement is a contract, apart from but also a part of the franchise disclosure document and franchise agreement. It obligates a specific franchisee to open a specific number of locations within a detailed time period.  Most Area Development Agreements provided exclusivity for a franchised area, provided however, that the franchisee meets the development schedule.  Area developers for the most part open all the locations for themselves under single one-unit franchise agreements.

A Master Franchisee Agreement is a contract, apart from but also a part of the franchise disclosure document and franchise agreement.  It gives the master franchisee the ability to sub-franchise and also, grant franchises to other franchisees within their franchised area.  The master franchisee will provide training and support to the franchisees he has recruited within his assigned franchise territory.  The master franchisee receives a portion of the initial franchise fee and a part of the royalties as an ongoing compensation.

Area development or master franchisee agreements will usually require a higher initial investment.  If you fail to meet the deadlines in the area development or master franchisee agreement, the franchisor may terminate the special agreement, but most will allow continued operation of the stores that have been opened, but you very well may lose exclusivity for the development area, and perhaps any up-front fees paid to the franchisor.

Using master franchisors might be the most cost effective way to establish your market as a new franchisor, especially if you in a service related business.

Special Sale: Purchase our complete set of Franchise Documents, and download all of our 10 Franchise Operations Manuals, Templates, and Forms. Including Disclosure Document, Franchise Agreement, Sales Brochure, Master Franchise Agreement, Area Developer Agreement, Franchisor Business Plan and our book How to Franchise.

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Related articles

• 2012 Franchise Disclosure Document (thebusinessstartupkit.com)
• Franchise Operations Manual is the Corporate Guidebook (thebusinessstartupkit.com)
• Franchise Your Business (thebusinessstartupkit.com)
• Guide to the FTC Franchise Rule and Franchisors Required Disclosures (thebusinessstartupkit.com)
• Franchising, although not the only method of expanding a business, it is undoubtedly the best way! (thebusinessstartupkit.com)

The franchisee must be mature but young enough to be hard working, a good manager, but not a person who will “rewrite the book”.

The franchisor will normally receive some kind of an inquiry either by way of

letter or telephone call from a prospective franchisee. Franchise magazines, when used correctly, can generate inquiries for your franchise network. The combination of advertising and extensive use of web listing sites can enable many franchisors to succeed. There are now a multitude of mediums where you can promote your franchise ranging from franchise exhibitions, franchise magazines, franchise websites, and even the national press.

The franchisor then responds by sending out a glossy presentation with details in relation to the franchise company and its particular success story.  The package should be accompanied by an explanation of what the franchisor does in terms of setting up the franchisee and continuing to service their needs afterwards.  Financial projections are usually also dispatched with the initial material. The franchisee is invited to complete an information sheet which provides the franchisor with details about the potential franchisee.  This will then be accompanied by a letter inviting the franchisee to contact the franchisor to discuss the matter.

Many franchisors develop what they call a franchise profile in terms of the type of person they would like to see as a potential franchisee.  You need to develop criteria as to the type of person you would like to see as a franchisee.  It is important that a potential franchisee have adequate financial resources.

The franchisee must be mature but young enough to be hard working.  When someone is thinking of taking on a franchise, it is important that they have the support and backup of their spouse or partner.  Some franchisors consider it important to have at least one meeting with the potential franchisee and their spouse.  The potential franchisee must be independent enough or motivated enough to be able to run their own business, but not so independent that they want to break away from the franchisor.

The franchisor will usually develop a book keeping system for the franchisee in order to simplify the accounting procedure and the financial reports to be made to the franchisor.   It is also usual to find that the franchisor will get involved in the initial promotion of the franchisee’s business, and marketing, and will give the franchisee assistance for a limited period of time.  It is normal to provide a representative on site for a week or two.

It is important to have the resources available in terms of manpower, to provide this service.

Location is very important to most businesses. Because of this, you or one of your agents should be heavily involved with selecting good locations for franchise stores.  Develop site selection criteria and a site selection approval form to help the franchisee choose a good location.

Develop a comprehensive program to train franchise managers and employees, support and monitor your franchisees.  Develop a continuous improvement program.

You should also have some arrangement with a bank whereby you can give some kind of financial information or loan information to potential Franchisees.

Initial Meeting with Franchisee

Any prospective franchisee that attends a meeting should be given an initial prospectus. Within this you should provide more detailed information on:

The background of the franchise:

Who are the principals:

What the franchise business does:

How the franchise business does it:

What the franchise opportunity consists of:

How to get in touch with the sales staff:

Financial statement for prospective franchisee to fill out and then return:

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It is essential to create a Pilot Business before Franchising your Business.

It is usually thought essential (according to most franchisor/franchisee

consultants) to the development of a franchise network that at least one pilot business be established.  A pilot business can be essential in insuring potential franchisees that the success of the business is not dependent on a unique situation or manager.  A pilot business will allow you to recognize and sort out problem areas in relation to marketing, acceptability of the product or service, local planning requirements, building regulations, and other similar problems relating to the type of business the franchise operates.  If you are able to financially develop a pilot business, then it would be a good thing to do, but not in my thinking something that has to be done, sure if you are rolling in money go ahead.

In developing the pilot business, operations as well as management skills can be honed.  In developing a pilot business, you can gain experience in the most efficient methods in operations, accounting, and marketing.  Here the procedures and processes, including the nitty gritty details are implemented in real life, and hopefully even improved before large scale operations.

As expected, problem‐solving and evaluation will be the major activity at this stage.

One idea might be to offer your first few franchisees a fifty percent discount off the price!  Should the franchisee decide to sell the franchise at a later date he will make a nice profit!  Your franchise agreement should most assuredly allow for this discount.  Make certain it does.

Another advantage is that pilot franchisees receive a higher level of franchisor support and are in a great position to take on more territories.

Special Sale: Purchase our complete set of Franchise Documents, and download all of our 10 Franchise Operations Manuals, Templates, and Forms. Including Disclosure Document, Franchise Agreement, Sales Brochure, Master Franchise Agreement, Area Developer Agreement, Franchisor Business Plan and our book How to Franchise.

$299.00

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• Franchising, although not the only method of expanding a business, it is undoubtedly the best way! (thebusinessstartupkit.com)

Financial controls are essential to every franchise, even if the franchisor uses franchise fixed fees. Every business has its thieves.  I have learned the hard way

(give some examples, or an example).  I personally have owned fifteen businesses and one franchise, and trust me when I tell you people will steal, they will steal.

Many years ago a business owner told me, “Well if he (speaking about a salesperson) can’t steal from me; he sure can’t steal for me.  Needless to say he didn’t make it but a few years in business.

With the event of modern cash registers and inventory systems which can report back to the franchise home office there is no reason to have lax accounting.  Bookkeeping and accounting should be a new franchisor’s first priority when deciding to franchise his business.  With the ability to process POS (Point of Sale) information through cloud computing all franchisees should be able to afford a POS system.  Where in days past a good POS and inventory system might have cost $20,000, it now can be bought for $200.00.  One which comes to mind is pos-gold which can be found at http://www.pos-gold.com/

Once all costs relating to the establishment and ongoing operation of the franchise system have been established you can decide what fees are to be payable by franchisees.

Territories and Fees:

Include a detailed plan detailing what territories are to be opened and on what time frame.  At the beginning most franchises choose to spread outwards from their existing geographical base on the hypothesis that they can supervise closer franchises more easily, then spread out when all the kinks are smoothed out.

Territories – Should be large enough to insure that the franchisee can achieve an adequate return – and small enough to insure they can be serviced properly within an adequate time frame.  At the same time, enough territories should be established to insure that the overall market is well served and you, the franchisor, receives a fair return on your investment.  It is also necessary to decide whether territories will be exclusive.

You will need to establish the franchise fees that will be required of the franchisee, such as:

Franchise Fee – The initial cost is charged to a franchisee for the right to join the franchise chain.

Service fee or Royalties – These are fees paid to the franchisor, as a percentage of gross profit of the franchisee.  These payments are sometimes established based on a minimum amount payable per month.

Training fees – Charges established for initial and/or ongoing training of franchisee personnel.

Marketing fund fees – Fees used to cover centralized advertising for the benefit of all franchisees.  The expenditure of these funds is usually accountable to the franchisees.

Advertising Fees - Most franchisors stipulate that franchisees spend a certain amount on local advertising.

In setting each of the above fees it is fundamental to insure that reasonable earnings can still be achieved for both the franchisor and the franchisee.

Most franchises have complex reporting requirements. These reports serve to facilitate close scrutiny of performance and potential by both the franchisee and the franchisor.  Both parties profit from such review, because it will often provide early warning of potential franchisee problems.

Once all costs relating to the establishment and ongoing operation of the franchise system have been established you can decide what fees are to be payable by franchisees.

Special Sale: Purchase our complete set of Franchise Documents, and download all of our 10 Franchise Operations Manuals, Templates, and Forms. Including Disclosure Document, Franchise Agreement, Sales Brochure, Master Franchise Agreement, Area Developer Agreement, Franchisor Business Plan and our book How to Franchise.  

$299.00

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• Franchise Your Business (thebusinessstartupkit.com)
• Franchise Operations Manual is the Corporate Guidebook (thebusinessstartupkit.com)
• Elements of Franchise Plan are Description, Marketing, Financial and Management (thebusinessstartupkit.com)

Franchise Disclosure Document and Franchise Agreement

A Disclosure Document and Franchise Agreement are needed to Franchise. The FDD, or Franchise Disclosure Document has replaced the older UFOC. The Franchise Agreement is the legal agreement between the Franchisor and Franchisee. It stipulates the assigned Franchisee territories, as well as all fee structures, that have to be paid. It also lists the obligations of the Franchisee and the Franchisor. Our Disclosure Document and Franchise Agreement have been drafted carefully to favor the franchisor, since they are the cornerstones of the Franchisor – Franchisee relationships.

Do It Yourself Premier Deluxe Franchise

Franchise Document Kit

Master Franchise Agreement, Area Development Agreement, and Mini-Store Agreement Included in Kit

Special Sale: Purchase our complete set of Franchise Documents, and download all of our 10 Franchise Operations Manuals, Templates, and Forms. Including Disclosure Document, Franchise Agreement, Sales Brochure, Master Franchise Agreement, Area Developer Agreement, Franchisor Business Plan and our book How to Franchise.

$299.00

Download Instructions for Your Franchise Kit

After you or you will receive an HTML file. Click to open the file with your Internet Browser. You will see a page open with a link to your product download page. Click the button in the middle of the page. Another web page will open it will be your download links page.

After clicking on any of the links for your product you should be prompted to save the file or given the option to “Open” or “Save”. Choose “Save.”

Next you are given the option to pick a file name and folder to save the file to. Choose “my documents” or “desk top”. Once the download is complete, locate the file and unzip it. You will in some cases need an unzip program such as 7-zip which can be obtained without paying for the program. We have provided this program on the product download pages.

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work.  Second, you would not know what to put in it, nor would you write it from an impartial viewpoint.  You would put copy such as, call our world class support department.   We are eager to give our franchisees support second to none!  One word, lawsuit!  Never promise, never advertise and never contradict your disclosure document and franchise agreement.  The operations manual isn’t the place to talk up your franchise offering.  The best bet in writing anything is to disclose number one, and deal only in facts. The lost franchisor above should have written something like, “Call our support department and we will service your request.”  No court can define find fought with facts.

Do It Yourself Premier Deluxe Franchise

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Related articles

• Franchise Operations Manual is the Corporate Guidebook (thebusinessstartupkit.com)
• Guide to the FTC Franchise Rule and Franchisors Required Disclosures (thebusinessstartupkit.com)
• Assessing Your Progress (thebusinessstartupkit.com)