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The Franchise Disclosure Document and Frequently Asked Questions

How to Create a Franchise and Franchise Disclosure Documents

Yep the franchise disclosure document package that you need in order to even start franchising can get confusing. This document outlines the responsiblities between you and your future franchisees (basically a roadmap of the entire relationship). In 2005 our President, Dave set out to create a process that makes it easy and as unintrusive as possible for business owners, like you, to not only have this package prepared but to have it completed where we do all the heavy lifting while also understanding every aspect of it.

That’s right, it is not about reverse delegation (for example giving you a questionnaire to fill out) or trying to fit a square into a circle (in other words it is not one size fits all). Nope, its about a collaborative effort where you are involved every step of the way. Does this mean your time will be hijacked? Not at all.

With our proprietary franchise development program we will create a custom franchise program with you for about an hour a week. Dave is old school and actually talks with you one-on-one about your business learning more about it and what is important to you as he builds the framework for your franchise relationship. Nothing is automated and with The Franchise Maker you will not be tossed around to various people when it comes to creating your franchise program.

Now let's get to your questions!

Because you want to grow your business, take it to the next level, using the most cost effective and widely-endorsed method of expansion. Perhaps you have identified a unique way to provide a service or you have a proprietary product offering; maybe you have hired employees only to find that once they leave you, they become your competitors (and you then realize you should be charging for such knowledge); or you have thought about expanding your business into other markets, but do not want to take on the cost of opening other locations or managing those locations.

The bottom line is that businesses take the leap into franchising for many reasons. If you are passionate about what you do and really want to teach others how to operate a business like yours, then it might be worth exploring how to franchise. Franchising is simply a solution and an industry that has put thousands of businesses on the map, transforming local businesses into nationally recognized brands. The Franchise Maker® will help you identify if franchising is the best vehicle of growth for you see our Learning Center article on "How to Know if My Business is Franchisable"

The Franchise Maker is a franchise development company that specializes in turning businesses like yours intoa custom-made franchise program. The Franchise Maker® provides the complete solution for business owners who want to experience accelerated growth through franchising and has assembled teams of professionals to assist with every aspect of franchising at reduced flat-fees. The Franchise Maker® does not sell franchise opportunities, does not use third parties to create your Franchise Disclosure Documents and does not ask for a percentage of your company as compensation for our services. We make franchising Easy, Fun and Affordable (see our Learning Center article on "Get to Know The Franchise Maker").

Absolutely, don’t be fooled by other websites flashing up a bunch of logos misrepresenting themselves as having franchised those businesses (in most cases those logos are simply businesses these companies worked with when selling franchises for them). All of the companies on our website are businesses we have taken to franchise from start-to-finish. We craft all Franchise Documents (FDD) from scratch and do NOT use templates ( see our Learning Center article to learn the problem with "Franchise Document Templates") (FDD) from scratch and do NOT use templates. There are no smoke and mirrors with us. Some others will only create the FDD. We have a comprehensive franchise development program and team that includes everything and everyone you need from attorneys to web developers. We will even prepare your franchise marketing materials, teach you how to qualify franchise applicants and show you where to advertise.

Nope, we are not franchise brokers and we do not market or sell any franchises. Separating the development process from the selling process means that we don’t have any hidden agendas when working with you. Some companies will overlap franchise development and franchise sales (brokerage) and tie in huge commissions for themselves or (here is a good one) expect equity in your business as part of their compensation ( see our Learning Center article on "Franchise Brokers vs Franchise Developers" ).

Fact: Franchising is regulated by the Federal Trade Commission (FTC) in an effort to protect consumers (potential franchisees) against fraud. Therefore before you can offer franchises anywhere in the United States, the entire franchise relationship between you and your future franchisees must be spelled out in a set of documents. This document used to be known as the Uniform Franchise Offering Circular (UFOC) and is now called the Franchise Disclosure Document (FDD). The Franchise Disclosure Document is a packet that has four major components to it: 1) the Franchise Disclosure; 2) set of exhibits; 3) Franchise Agreement; and 4) schedules (read this article to learn about "The Elements of a Franchise Disclosure Document"). This entire Franchise Disclosure Document is typically between 150-200 pages in length.

The Franchise Disclosure (or simply the Disclosure) is the first part of the Franchise Disclosure Document. This section outlines the entire relationship between you (the franchisor) and your buyers (franchisees). This section is a summary of: a description of your business, startup costs for someone who is going to start or open your business, your responsibilities to franchisees and of course franchisee responsibilities to you. Also things such as: franchise fee, royalties, an explanation of territory and an explanation of what services and/or products the franchisee is authorized to use, purchase, offer and sell while operating their business. These are just a few of the things you can expect to see in the Disclosure section of the Franchise Disclosure Document and all is split out into 23 parts (called items). This section is typically following by a set of exhibits.

The Franchise Agreement is a part of the Franchise Disclosure Document and plays off the Disclosure. The Franchise Agreement takes all the information in the Disclosure and blows it up into much greater detail. The Franchise Agreement uses the information in the Disclosure as the foundation to fully detail out all your responsibilities to the franchisee and the franchisee’s responsibilities to you. The Franchise Agreement also goes into great detail about your trade secrets and if crafted correctly can provide an extra layer of protection in addition to a non-compete agreement. Furthermore if structured correctly the Franchise Agreement should protect you against vicarious liability, require that the franchisee indemnify and hold you harmless against any type of demands or claim made against the franchisee, protect you against any type of joint employer relationship (see our Learning Center article on "Making Sense of the NLRB, Franchising & Joint Employer Relationships")... and that’s just to name a few. The Franchise Agreement will also detail out how disputes are resolved between you and the franchisee, different ways the franchise can be terminated (either by you or the franchisee) and what is required of the franchisee if the Franchise Agreement is terminated early. The Franchise Agreement is typically complemented by a set of schedules.

More than 50% of all franchise litigation results from franchise sales misrepresentation (according to the American Bar Association). This is why you must be very careful who is talking to your franchise applicants so your franchisees do not come back later and sue you for fraud and misrepresentation (see our Learning Center article on "Franchise Legal Problems Due to Sales Misrepresentations"). Franchise brokers (or any third party who gets a commission from helping you sell franchises) are notorious for misrepresenting franchise opportunities (be careful some of them masquerade themselves as franchise consultants or franchise advisors). In our opinion there are only a couple of really good franchise brokerage companies out there who have been around for years and franchise sales is all they do (note: they do not perform franchise development services; only sales). Ideally we would rather teach you how to screen and qualify franchise applicants which will drastically minimize your liability, not to mention why not save yourself the hefty commissions of a franchise broker if you and your team can do it.

When franchising there are many different ways you can generate income. (1)The franchise fee is a one-time fee you collect to reimburse you for the training as well as all of your assistance in helping set someone up to operate their business. This is a significant fee and is intended to offset all your upfront training costs. Now you will get paid for your knowledge instead of giving free advice; (2) You will receive ongoing royalties for your continued support and guidance and use of your name and systems you have developed. Royalties are typically a percentage of gross revenues earned by franchisees; and (3)You may require franchisees to purchase products and/or specialized services directly from you. These are just a few of the ways you can use the power of franchising to create serious profits and cash flow (see our Learning Center article on "How to Make Money Franchising Your Business"). We can go into further detail when you contact us.

Yep, we sure do. Anyone can franchise a hot dog business; it is the businesses that are unique and different that really excites us (see client comments). We definitely have franchised (and currently are franchising) some unique business models. Remember, all of our documents are created from scratch. That means that from the start, the uniqueness of your business is built into your Franchise Disclosure Documents.

We don’t expect you to have any of these answers, nor do we give you a questionnaire to fill out. Once we bring you on as a client, we will do a market study of other like-and-kind businesses out there already offering franchises. We will compare your deliverables to others and position you aggressively and attractively so when you start awarding franchises (notice I did not say selling) your franchise opportunity will be attractive. (See our Learning Center article on "Franchise Fees and Royalties Made Easy.") Unlike attorney firms, we do not just provide you with a fifty-plus page packet or questionnaire that you are expected to fill out already knowing these answers. Not to worry, we will guide you through it all using a bit of business common sense.

Nope, we have worked with many clients that have already completed certain elements of what is needed when franchising. If you have not done anything regarding trademarking, no worries we have domestic and international patent and trademark attorneys as part of our franchise development services.

Well for starters the business must be up and running (preferably for at least one year). What are your reasons for franchising? Is there a demand for your services and/or products? Is the business you're operating scalable and what are the ways you generate revenue? We will ask you a series of questions, like these, to determine if your business makes sense to franchise (see our Learning Center article on "Does Your Business Measure Up for Franchising?"). FYI: About 90% of businesses that we talk with about wanting to franchise, we turn away and suggest that they do not franchise. In our opinion, not every business makes sense to franchise.

No, we don’t. If anyone does ask you to give up equity, turn around and RUN! This is something new that has popped up over the last few years, go figure. It’s like hiring a general contractor to build your house and the general contractor asking for a piece of the action each time the house increases in value. We have never heard of this happening. Asking you for equity, yeah right, leave it up to a hungry franchise broker to come up with this one. Our franchise development program is a one-time FLAT FEE. You will know exactly what you are spending at all times. You keep your equity, you maintain control and you call the shots ( see our Learning Center article on "I Want to Franchise My Business but I am Being Asked to Give Away Equity" ).

A business model that meets our criteria, the right attitude, enthusiasm and a willingness to do what it takes to make a positive difference in the lives of many people (see our Learning Center article on "Requirements to Franchise Your Business"). You must be committed to advertise and market your franchise opportunity. You don’t have to take any classes or read any manuals. During our franchise development process, we’ll go through each detail with you, step-by-step and you will become well-educated in your new franchise model so that you are able to speak about all aspects of your franchise opportunity to potential franchisees.

Quite simply, to save time, money and aggravation! The Franchise Maker® is your turn-key solution for your turn-key business. We have the solutions to meet your needs. The Franchise Maker® will provide you with all of the facts and unbiased information you will need to successfully franchise your business . The Franchise Maker® will manage the entire process to franchise your business resulting in a complete franchise development program. From the creation of your Franchise Disclosure Documents to a comprehensive franchise qualification process for all franchise applicants, The Franchise Maker ® team does it all.

Anything you do involves risk. The Franchise Maker® helps you to minimize that risk. Franchising adds credibility to businesses, yet it is powerful and dangerous at the same time. Powerful because of branding, exploding growth and the culture that is created. Dangerous because when not done correctly it has the potential to destroy the lives of many who pour their life savings into their business. More than half of all new franchise systems fail each year. Some of the most common reasons for failure are due to lack of money to attract franchise applicants, poor training and corporate support for franchisees. Franchising is not simply about signing contracts and selling franchises. Those who do not take the time to orchestrate all the pieces correctly, do not take the franchise development process serious and try to bootstrap operations have a greater risk of failure.

As a franchisor, it is your responsibility to provide all training, industry updates, marketing strategies and continuous support necessary for franchisees to succeed. Your success as a franchise system is dependent on their success as an operator.

Both Federal and State Governments regulate franchises. This means that every franchise system is required to provide prospective franchisees with a disclosure package referred to as a Franchise Disclosure Document (FDD). This is one of the things that separate a franchise from any other business opportunity and why so many people invest in franchises (see our Learning Center article on "What is the True Definition of a Franchise?"). Franchise systems are regulated to protect the franchisee and gives added credibility to your business model.

Remember that franchising is countercyclical to the economy. History has shown that when people lose their jobs and/or faced with layoffs or early retirement they turn to entrepreneurial thoughts for some that means wanting to start their own business (see our learning center on differences between entrepreneur and business owner). Remember the perception of franchising is that it is “safe” therefore making it an attractive offer. Add on top of that, franchise concepts that are home-based or mobile requiring very little overhead expenses and we have the ingredients for a perfect franchise sales climate. Smart franchisors understand the opportunities in a down economy and take advantage of them (see our Learning Center article on "Franchising: A Down Economy Helps").

The Franchise Maker® is sensitive to your needs to minimize costs and believes you should spend your money on different initiatives that will further enhance your entire franchise system rather than fees just to franchise it. All costs to franchise your business are a FIXED FLAT RATE. You can expect the absolute total cost to franchise your business to be $2M dollars (just kidding) it is actually a lot less than $50K with the Franchise Maker. Unlike other costs you may have seen on the internet or heard about, this represents a true comprehensive cost. Fees for our services are broken down into different phases and you can choose to pay as each phase is completed. This is our Pay-As-You-Go program where you do not have to commit to a large sum of money up front. After receiving a small amount to get started, we will begin work immediately. Our Pay-As-You-Go program gives you added confidence in our services since the risk is shifted on us to perform for you. To learn about our Pay-As-You-Go program or Discount Program (for those who wish to pay our fee upfront) see our series of videos that explain these costs in greater detail.

No. The cost to franchise your business is not contingent on how long the franchising process takes to complete. We understand as business owners that many things come up and we are very flexible to your schedule. Your time commitment to us for your franchise development can be as little as one hour per week. The entire process to franchise your business can go as quick as 90 days and as long as one year. However we do not want your franchise development process to take longer than one year for many reasons. Call us and we will be happy to explain.

As a franchisor you will not disclose any financial information for your existing business however, as a franchisor, you will need to show financial stability. You must be funded beyond the franchise development stage of becoming a franchisor. At minimum, you must show financial strength to provide for the obligations you will have to your franchisees which will include: franchise training, administrative, opening support and other defined deliverables. Let’s not forget to mention the FDD requires current audited financials of the franchisor. How much you fund your franchise system takes into account many factors (see our Learning Center article on "Beyond Development: Funding Your Franchise Company").

The answer is simple. Rather than use your money to open other locations, hire and manage employees (who do not care about your business to run it) you can leverage the resources of an entrepreneur who has skin in the game, to do it. If branding your business and consistency of your service and/or product is important to you, then franchising is the best way to go (see our Learning Center article on "Open More Locations or Franchise? What to Do."). Keep in mind you will not be managing the day-to-day business. It will be up to the franchisee to run the business according to your standards. As a franchisor you maintain control and is an optimal way to expand your business if you do not want to it by opening other locations yourself. When franchising is done correctly, it is not unusual for franchisees to have businesses more successful than you and the loyalty built within the franchise system is priceless.

An unpredictable hurdle in franchising is the registration of the franchise in Registration States. There are fourteen states that require a stricter process before you can begin to offer franchises for sale (see our Learning Center article on "Franchise Registration: Some States are Tougher"). The Registration States require that your FDD is submitted to them for approval (all for the purposes of protecting the consumer, in this case the franchisee). California is one of the strictest of all fourteen states. The approval process to begin offering the sale of franchises in a Registration State can take a few weeks or several months depending on various factors including how well the FDD is written. We have had 100% success in the registration states. Each registration state is different and timing for approval can vary. For additional information on registration states, contact us.

Give us a call. You have questions and we have answers. We will have a series of conversations so that we understand your business and you fully understand all the steps necessary to franchise your business. After we get to know each other, you may be able start immediately. We limit the number of clients we bring on each calendar month. We will move as fast or as slow through the franchise development process as you dictate. The Franchise Maker®, like the mailman, we deliver.
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