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Should You Franchise Your Business?

| Apr 18, 2016 | Firm News

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.