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Thread: Turning your business into a franchise.

  1. #11
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    I’ve “franchised” businesses myself and have helped others. So here are a few comments.
    Don’t be afraid to franchise. Many, many small businesses have followed that path.

    Assuming all the “business” aspects are in place, successful model, etc. the actual steps to becoming a franchise are very standard and not nearly as difficult as you may think.

    As someone mentioned you need the main legal document, the FDD, or Franchise Disclosure Document. This document is a format prescribed by the FTC that simply assures full disclosure of all aspects of the offering. It’s long and tedious but pretty much boilerplate. It doesn’t require actual FTC review. You must also follow some relatively easy procedures such as allowing 10 days before you can accept a franchise fee. Actually, other than having created the format, the FTC has little to do with franchises. It isn’t reviewed or approved by the FTC. However, if there are enough complaints they will prohibit you from further franchising.
    The real importance of complying with the FDD is simply that if you are sued by a franchisee and your FDD is not prepared properly you automatically lose.

    It is the states that you really have to deal with. Most states have very little oversight regarding franchising. Most states do not even require that you submit your franchise (FDD) for review. There are some states that do have more rigorous regulations and do require a review and approval. The toughest is California. Florida on the other hand just requires a $ 100 annual fee, without ever reviewing your FDD. Again, it’s the courtroom where the FDD is critical.

    An FDD can be prepared by Franchise attorneys for less than $ 10,000. It’s the larger “Franchising” companies that are expensive. You can save a lot of money by simply addressing the various issue yourself, prior to hiring an attorney. You can actually prepare your own FDD and then have an attorney review and edit. I’ve done that myself.

    The hard part is marketing! Even assuming it is a profitable business, selling franchise opportunities is very difficult and extremely competitive. That is a whole other discussion.

    More difficult than the legal documents is the operating manual.

    The process may seem complicated, but in reality it’s a standard format that is just tedious.

  2. #12
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    If your business lead is familiar among the public to a certain area of your operation or beyond the area of operation or your customers are more in the area you are looking for, may need to open a branch office. It is better than franchising. Royalty would very lean than the direct marketing profit. More business people are expecting franchise for familiar products and brands.

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