A business relationship which involves criteria(according to FTC Rule 436) where the franchisee is given the right to distribute goods and services which bear the franchisor’s trademark, service mark, trade name, advertising, or other commercial symbol, extended significant control or assistance, including site approval, site design or appearance requirements, specified hours of operation, accounting practices, personnel policies, required promotional campaigns, training programs.
According to Rule 436, “The franchisee must be required to pay the franchisor (or an affiliate of the franchisor), as a condition of obtaining or commencing the franchise operation. Required payments include franchise fees, royalties, training fees, bookkeeping charges, payments for services, rent, or even from product sales (if they are sold above a bona fide wholesale price).Franchisor is required to provide prescribed disclosure documentation to prospective franchisees at the first face-to-face meeting during which the sale of a franchise is discussed.
After evaluating a business and determining how franchising fits with your specific goals and objectives a franchisor should develop a business plan outlining the company’s growth and strategy for the next five years. A franchisor needs certain new capabilities and will need to be sure that these capabilities are seamlessly integrated into existing organizational functionality.
To ensure successful franchisees and maintain quality control, the franchisor needs to develop a state-of-the-art operations manual for its franchisees. This manual will serve as a sales tool demonstrating franchisor competence to new prospects, as a training guide for new franchisees, as a reference guide for established franchisees, as a “liability limiter” for the franchisor, and as a legally binding quality control device for the entire chain.
The franchisor should also develop training programs for use in conjunction with the operations manual. Computer-based tools and programs are highly effective, as are training videos, and can be used for the franchisee, for the franchisee’s employees, and for corporate employee.
To be legally entitled to sell franchises, the franchisor needs to develop a franchise agreement and a FDD (Franchise Disclosure Document), and will need to file with appropriate state authorities on a national basis.
Selling franchises will require a specific marketing plan designed to get the franchisor’s message to the targeted franchise prospect.
Once the prospect has been identified, the franchisor will also require marketing tools to assist it in the sale of franchises
The tools necessary for franchising a business can be developed in approximately three months from the completion of the implementation plan, although state registrations may delay a company’s ability to sell in certain states for another three to four months. Altogether, a new franchisor can anticipate that the franchise program should take between six months and a year to fully implement. The cost of a well-designed program varies substantially, depending on the strategy chosen and the desired speed of expansion.
International Franchise Growth: For international franchise growth or expansion we can offer services to help development of international franchise expansion plans for companies targeting international markets, to represent franchise in foreign markets in a brokerage capacity. We can assist to franchise your business in the U.S. market. ABBG has proven expertise in assessing a company’s readiness to expand through franchising in the U.S. Our engagements are highly customized to meet the specific needs of each client. Together, we can determine how franchising fits with your specific goals and objectives.
Corporate Valuation: We can develop a valuation analysis for a multiple unit franchisor to sell corporate.
