Deciding on the Terms of Your Franchise

Once you have decided to start a franchise business, you have a number of decisions to make, such as:

What should be the amount to charge for the initial franchise fee and royalty payments
Which companies will be authorized suppliers
What advertising fees, should you charge to franchisees
What obligations should the franchisee have to the franchisor
What type of support will you provide to your franchisee
How will franchisees be trained
How should you define the franchisee’s territory
How much should you charge for royalty payments
Should you charge a minimum royalty

Preparation of a Franchise Disclosure Document (FDD)

Your business must comply with federal franchise laws governed by the Federal Trade Commission (FTC), and often with state regulations as well. Franchisors are required to provide a written disclosure document (called a Franchise Disclosure Document (FDD)) to all potential franchisees within a certain period of time. The FDD must disclose 23 required items to potential franchisees, including:

A summary of the business and anticipated competitors
Any required regulatory compliance for that industry
Information about the background of the franchisor
Bankruptcy and litigation history of the company and people involved
Trademark registration information
The total initial expected investment by the potential franchisee in the first 3 to 6 months of operating the franchised business
A schedule of company and franchised locations and anticipated franchise openings
Audited financials of the franchisor

Have the attorneys at Lanard and Associates help you determine if franchising your successful business is the right way to expand.