2020-04-27

Understanding your franchise agreement

Blogs

What is the Franchise Disclosure Document? The first incarnation of the FDD was actually the UFOC: Uniform Franchise Offering Circular, created in 1979 by the Federal Trade Commission. It was updated by the trade commission in 2007 and became the Franchise Disclosure Document. The trade commission requires franchisors to disclose specific ñessential information,î in the form of the FDD, to the potential buyer at least two weeks before signing any contract. This paragraph deleted. The Franchisor This section gives you an overview of the brand: a full history of the business, with information on the ownership and any affiliated companies. Requirements around licensing or permitting are also detailed here. Business Experience Here youÍll find a list of the key individuals who lead your brand „ where theyÍve worked in the past and what kind of experience they have (or donÍt have) in the world of franchising. Think of this section as the leadershipÍs resume, and make sure to ask yourself if the people leading your potential new franchise have the type of experience you feel comfortable following? Litigation Item 3 lays out any civil or criminal litigation the brand or management have been involved in. In particular, youÍll learn if any of the executives have committed a felony or been held liable for fraud, franchise law violations, deceptive or unfair practices or a settlement of civil actions surrounding the franchise covenant. Additionally, any action that has been taken by the brand against a franchisee is laid out here and may include lawsuits for non-compliance with franchise rules, failure to pay fees or trademark infringement. Bankruptcy Have any of the brandÍs executives had a personal bankruptcy, or been on the team of another franchise that filed bankruptcy? If yes, youÍll find out in this section. Which can be a potential red flag, and something you may want to learn more about. Initial Fees Here we move away from the people involved with the franchise and start digging into the financial requirements. The Initial Fees section is an important one, for obvious reason: here youÍll find out just how much this brand will cost up front. These fees can include the initial investment (often a range), deposits, inventory, equipment, signage, royalties and leases. If there is a range, sometimes this section will detail the determining factors for who pays what. If it doesnÍt, be sure to ask! Other Fees This section details out the fees that will come after all of the initial costs. Typically, these include advertising and training. For example, you may need to pay for transportation to and lodging during your training at brand HQ ? among other thing. Initial Investment This information is presented in the form of a table, and brings together all of the fees that have been detailed in prior sections. Item 7 provides you with the final (estimated) amount that you will pay as your up-front investment. Restrictions on Sources of Products and Services As you know, the beauty of a franchise is in the tested repeatability of the model. Part of that repeatability is sourcing your products and services from the same place all of the other franchisees do, to ensure uniformity. This section lists the suppliers your franchisor has pre-approved. FranchiseeÍs Obligations This section details ? you guessed it ? all of the things you need to do to keep up your end of the bargain. It is an all-inclusive list of your obligations once you sign the contract with your franchise brand. Financing In Item 10, the brand will lay out any financing option they have. The terms and agreements are often very similar to that of a bank loan, with all of the attending pros and cons. Franchisors also often partner with companies or lenders that specialize in franchise and small business financing. Ask your brand who they recommend, so you can have a full picture of your financing options. FranchisorÍs Assistance, Advertising, Computer Systems and Training Here you will see all of the ways in which the franchisor will support you: training, marketing, systemsƒthe title really just says it all. Not all franchises provide the same amount of support ? make sure your chosen brand provides the level of support you are looking for. Territory Franchisors often use a system of protected territories, which ensures no geographic area becomes overly saturated with franchisee locations. When you have a protected territory, only you will be operating with that brand in that territory. Not all brands use this system, however, and even the ones that do can be modified upon contract renewal. Trademarks This oneÍs easy ? a list of all the trademarks and trade names associated with the franchise. Patents, Copyrights and Proprietary Information Similar to the above, this is a list of the patents, copyrights and proprietary information of the brand. (Again, itÍs all in the title.) Obligation to Participate in the Actual Operation of the Franchise Business This title is talking about your obligation. Can you hire somebody to manage your store for you, or do you need to be involved in the daily operations of your location? YouÍll find the answer in this section. Restrictions on What the Franchisee May Sell They didnÍt get too creative with these section titles, did they? But perhaps thatÍs for the best ? these documents are complex enough as it is. Here youÍll see exactly which products and services you are permitted to sell at your location. This is in line with that whole ïuniformity is keyÍ thing these franchisors have going on. Renewal, Termination, Transfer and Dispute Resolution Here is the outline of what will happen if you choose to renew your franchise agreement, terminate, transfer the rights to your location to another franchisee or need to resolve a dispute with your brand (fun stuff). Public Figures In the event your brand uses a celebrity or other ñpublic figureî for marketing purposes, this section will lay out the details of that agreement. Financial Performance Representations HereÍs where things get a little tricky: in theory, this section should tell you about the finances of single locations. However, most franchises do not disclose profits or income ? and if they donÍt, they have to tell you that. (Yeah, itÍs super weird.) So, pay extra attention to this section and keep an eye out for things like location figures, gross sales, average earnings and how sales differ by region. Outlets and Franchisee Information This is your friend-making section, where the franchise provides a list of locations that have opened, terminated, transferred or cancelled within the last three years. YouÍll receive the contact information of these owners, so start making some calls! These individuals are excellent assets to you, and can shed light on what the day-to-day ownership of this brand is really like. Additionally, with this list you can see how many franchisees choose to renew or close ? a telling statistic. Financial Statements But wait, you ask, didnÍt we go over finances in Item 19? Yes, we did ? for franchise units. This section looks at the overall, combined financial health of the brand by providing audited balance sheets and profit and loss statements. This is another one to pay close attention to ? particularly the income difference between sales and royalties (hint: sales income should be higher!). Contracts Here is a list of each agreement you will be required to sign to become an official franchisee. Receipts And last but not least, youÍll be required to sign a receipt that confirms you have received the Franchise Disclosure Document You can also take a look at real or sample FDDs through online resources like this one. And, again, we highly recommend you go through any FDD youÍre considering with an experienced franchise attorney. Okay! We know that was a lot ? thanks for sticking it out. On to the next chapter: figuring out how to pay for this. Visit www.dromise.com

Tags: nan
2020-04-27

Understanding your franchise agreement

Blogs

What is the Franchise Disclosure Document? The first incarnation of the FDD was actually the UFOC: Uniform Franchise Offering Circular, created in 1979 by the Federal Trade Commission. It was updated by the trade commission in 2007 and became the Franchise Disclosure Document. The trade commission requires franchisors to disclose specific Òessential information,Ó in the form of the FDD, to the potential buyer at least two weeks before signing any contract. This paragraph deleted. The Franchisor This section gives you an overview of the brand: a full history of the business, with information on the ownership and any affiliated companies. Requirements around licensing or permitting are also detailed here. Business Experience Here youÕll find a list of the key individuals who lead your brand Ñ where theyÕve worked in the past and what kind of experience they have (or donÕt have) in the world of franchising. Think of this section as the leadershipÕs resume, and make sure to ask yourself if the people leading your potential new franchise have the type of experience you feel comfortable following? Litigation Item 3 lays out any civil or criminal litigation the brand or management have been involved in. In particular, youÕll learn if any of the executives have committed a felony or been held liable for fraud, franchise law violations, deceptive or unfair practices or a settlement of civil actions surrounding the franchise covenant. Additionally, any action that has been taken by the brand against a franchisee is laid out here and may include lawsuits for non-compliance with franchise rules, failure to pay fees or trademark infringement. Bankruptcy Have any of the brandÕs executives had a personal bankruptcy, or been on the team of another franchise that filed bankruptcy? If yes, youÕll find out in this section. Which can be a potential red flag, and something you may want to learn more about. Initial Fees Here we move away from the people involved with the franchise and start digging into the financial requirements. The Initial Fees section is an important one, for obvious reason: here youÕll find out just how much this brand will cost up front. These fees can include the initial investment (often a range), deposits, inventory, equipment, signage, royalties and leases. If there is a range, sometimes this section will detail the determining factors for who pays what. If it doesnÕt, be sure to ask! Other Fees This section details out the fees that will come after all of the initial costs. Typically, these include advertising and training. For example, you may need to pay for transportation to and lodging during your training at brand HQ Ð among other thing. Initial Investment This information is presented in the form of a table, and brings together all of the fees that have been detailed in prior sections. Item 7 provides you with the final (estimated) amount that you will pay as your up-front investment. Restrictions on Sources of Products and Services As you know, the beauty of a franchise is in the tested repeatability of the model. Part of that repeatability is sourcing your products and services from the same place all of the other franchisees do, to ensure uniformity. This section lists the suppliers your franchisor has pre-approved. FranchiseeÕs Obligations This section details Ð you guessed it Ð all of the things you need to do to keep up your end of the bargain. It is an all-inclusive list of your obligations once you sign the contract with your franchise brand. Financing In Item 10, the brand will lay out any financing option they have. The terms and agreements are often very similar to that of a bank loan, with all of the attending pros and cons. Franchisors also often partner with companies or lenders that specialize in franchise and small business financing. Ask your brand who they recommend, so you can have a full picture of your financing options. FranchisorÕs Assistance, Advertising, Computer Systems and Training Here you will see all of the ways in which the franchisor will support you: training, marketing, systemsÉthe title really just says it all. Not all franchises provide the same amount of support Ð make sure your chosen brand provides the level of support you are looking for. Territory Franchisors often use a system of protected territories, which ensures no geographic area becomes overly saturated with franchisee locations. When you have a protected territory, only you will be operating with that brand in that territory. Not all brands use this system, however, and even the ones that do can be modified upon contract renewal. Trademarks This oneÕs easy Ð a list of all the trademarks and trade names associated with the franchise. Patents, Copyrights and Proprietary Information Similar to the above, this is a list of the patents, copyrights and proprietary information of the brand. (Again, itÕs all in the title.) Obligation to Participate in the Actual Operation of the Franchise Business This title is talking about your obligation. Can you hire somebody to manage your store for you, or do you need to be involved in the daily operations of your location? YouÕll find the answer in this section. Restrictions on What the Franchisee May Sell They didnÕt get too creative with these section titles, did they? But perhaps thatÕs for the best Ð these documents are complex enough as it is. Here youÕll see exactly which products and services you are permitted to sell at your location. This is in line with that whole Ôuniformity is keyÕ thing these franchisors have going on. Renewal, Termination, Transfer and Dispute Resolution Here is the outline of what will happen if you choose to renew your franchise agreement, terminate, transfer the rights to your location to another franchisee or need to resolve a dispute with your brand (fun stuff). Public Figures In the event your brand uses a celebrity or other Òpublic figureÓ for marketing purposes, this section will lay out the details of that agreement. Financial Performance Representations HereÕs where things get a little tricky: in theory, this section should tell you about the finances of single locations. However, most franchises do not disclose profits or income Ð and if they donÕt, they have to tell you that. (Yeah, itÕs super weird.) So, pay extra attention to this section and keep an eye out for things like location figures, gross sales, average earnings and how sales differ by region. Outlets and Franchisee Information This is your friend-making section, where the franchise provides a list of locations that have opened, terminated, transferred or cancelled within the last three years. YouÕll receive the contact information of these owners, so start making some calls! These individuals are excellent assets to you, and can shed light on what the day-to-day ownership of this brand is really like. Additionally, with this list you can see how many franchisees choose to renew or close Ð a telling statistic. Financial Statements But wait, you ask, didnÕt we go over finances in Item 19? Yes, we did Ð for franchise units. This section looks at the overall, combined financial health of the brand by providing audited balance sheets and profit and loss statements. This is another one to pay close attention to Ð particularly the income difference between sales and royalties (hint: sales income should be higher!). Contracts Here is a list of each agreement you will be required to sign to become an official franchisee. Receipts And last but not least, youÕll be required to sign a receipt that confirms you have received the Franchise Disclosure Document You can also take a look at real or sample FDDs through online resources like this one. And, again, we highly recommend you go through any FDD youÕre considering with an experienced franchise attorney. Okay! We know that was a lot Ð thanks for sticking it out. On to the next chapter: figuring out how to pay for this. Visit www.dromise.com

Tags: NA
2020-04-27

Understanding your franchise agreement

Blogs

What is the Franchise Disclosure Document? The first incarnation of the FDD was actually the UFOC: Uniform Franchise Offering Circular, created in 1979 by the Federal Trade Commission. It was updated by the trade commission in 2007 and became the Franchise Disclosure Document. The trade commission requires franchisors to disclose specific ñessential information,î in the form of the FDD, to the potential buyer at least two weeks before signing any contract. This paragraph deleted. The Franchisor This section gives you an overview of the brand: a full history of the business, with information on the ownership and any affiliated companies. Requirements around licensing or permitting are also detailed here. Business Experience Here youÍll find a list of the key individuals who lead your brand „ where theyÍve worked in the past and what kind of experience they have (or donÍt have) in the world of franchising. Think of this section as the leadershipÍs resume, and make sure to ask yourself if the people leading your potential new franchise have the type of experience you feel comfortable following? Litigation Item 3 lays out any civil or criminal litigation the brand or management have been involved in. In particular, youÍll learn if any of the executives have committed a felony or been held liable for fraud, franchise law violations, deceptive or unfair practices or a settlement of civil actions surrounding the franchise covenant. Additionally, any action that has been taken by the brand against a franchisee is laid out here and may include lawsuits for non-compliance with franchise rules, failure to pay fees or trademark infringement. Bankruptcy Have any of the brandÍs executives had a personal bankruptcy, or been on the team of another franchise that filed bankruptcy? If yes, youÍll find out in this section. Which can be a potential red flag, and something you may want to learn more about. Initial Fees Here we move away from the people involved with the franchise and start digging into the financial requirements. The Initial Fees section is an important one, for obvious reason: here youÍll find out just how much this brand will cost up front. These fees can include the initial investment (often a range), deposits, inventory, equipment, signage, royalties and leases. If there is a range, sometimes this section will detail the determining factors for who pays what. If it doesnÍt, be sure to ask! Other Fees This section details out the fees that will come after all of the initial costs. Typically, these include advertising and training. For example, you may need to pay for transportation to and lodging during your training at brand HQ ? among other thing. Initial Investment This information is presented in the form of a table, and brings together all of the fees that have been detailed in prior sections. Item 7 provides you with the final (estimated) amount that you will pay as your up-front investment. Restrictions on Sources of Products and Services As you know, the beauty of a franchise is in the tested repeatability of the model. Part of that repeatability is sourcing your products and services from the same place all of the other franchisees do, to ensure uniformity. This section lists the suppliers your franchisor has pre-approved. FranchiseeÍs Obligations This section details ? you guessed it ? all of the things you need to do to keep up your end of the bargain. It is an all-inclusive list of your obligations once you sign the contract with your franchise brand. Financing In Item 10, the brand will lay out any financing option they have. The terms and agreements are often very similar to that of a bank loan, with all of the attending pros and cons. Franchisors also often partner with companies or lenders that specialize in franchise and small business financing. Ask your brand who they recommend, so you can have a full picture of your financing options. FranchisorÍs Assistance, Advertising, Computer Systems and Training Here you will see all of the ways in which the franchisor will support you: training, marketing, systemsƒthe title really just says it all. Not all franchises provide the same amount of support ? make sure your chosen brand provides the level of support you are looking for. Territory Franchisors often use a system of protected territories, which ensures no geographic area becomes overly saturated with franchisee locations. When you have a protected territory, only you will be operating with that brand in that territory. Not all brands use this system, however, and even the ones that do can be modified upon contract renewal. Trademarks This oneÍs easy ? a list of all the trademarks and trade names associated with the franchise. Patents, Copyrights and Proprietary Information Similar to the above, this is a list of the patents, copyrights and proprietary information of the brand. (Again, itÍs all in the title.) Obligation to Participate in the Actual Operation of the Franchise Business This title is talking about your obligation. Can you hire somebody to manage your store for you, or do you need to be involved in the daily operations of your location? YouÍll find the answer in this section. Restrictions on What the Franchisee May Sell They didnÍt get too creative with these section titles, did they? But perhaps thatÍs for the best ? these documents are complex enough as it is. Here youÍll see exactly which products and services you are permitted to sell at your location. This is in line with that whole ïuniformity is keyÍ thing these franchisors have going on. Renewal, Termination, Transfer and Dispute Resolution Here is the outline of what will happen if you choose to renew your franchise agreement, terminate, transfer the rights to your location to another franchisee or need to resolve a dispute with your brand (fun stuff). Public Figures In the event your brand uses a celebrity or other ñpublic figureî for marketing purposes, this section will lay out the details of that agreement. Financial Performance Representations HereÍs where things get a little tricky: in theory, this section should tell you about the finances of single locations. However, most franchises do not disclose profits or income ? and if they donÍt, they have to tell you that. (Yeah, itÍs super weird.) So, pay extra attention to this section and keep an eye out for things like location figures, gross sales, average earnings and how sales differ by region. Outlets and Franchisee Information This is your friend-making section, where the franchise provides a list of locations that have opened, terminated, transferred or cancelled within the last three years. YouÍll receive the contact information of these owners, so start making some calls! These individuals are excellent assets to you, and can shed light on what the day-to-day ownership of this brand is really like. Additionally, with this list you can see how many franchisees choose to renew or close ? a telling statistic. Financial Statements But wait, you ask, didnÍt we go over finances in Item 19? Yes, we did ? for franchise units. This section looks at the overall, combined financial health of the brand by providing audited balance sheets and profit and loss statements. This is another one to pay close attention to ? particularly the income difference between sales and royalties (hint: sales income should be higher!). Contracts Here is a list of each agreement you will be required to sign to become an official franchisee. Receipts And last but not least, youÍll be required to sign a receipt that confirms you have received the Franchise Disclosure Document You can also take a look at real or sample FDDs through online resources like this one. And, again, we highly recommend you go through any FDD youÍre considering with an experienced franchise attorney. Okay! We know that was a lot ? thanks for sticking it out. On to the next chapter: figuring out how to pay for this. Visit www.dromise.com

Tags: nan
2020-04-27

Understanding your franchise agreement

Blogs

What is the Franchise Disclosure Document? The first incarnation of the FDD was actually the UFOC: Uniform Franchise Offering Circular, created in 1979 by the Federal Trade Commission. It was updated by the trade commission in 2007 and became the Franchise Disclosure Document. The trade commission requires franchisors to disclose specific Òessential information,Ó in the form of the FDD, to the potential buyer at least two weeks before signing any contract. This paragraph deleted. The Franchisor This section gives you an overview of the brand: a full history of the business, with information on the ownership and any affiliated companies. Requirements around licensing or permitting are also detailed here. Business Experience Here youÕll find a list of the key individuals who lead your brand Ñ where theyÕve worked in the past and what kind of experience they have (or donÕt have) in the world of franchising. Think of this section as the leadershipÕs resume, and make sure to ask yourself if the people leading your potential new franchise have the type of experience you feel comfortable following? Litigation Item 3 lays out any civil or criminal litigation the brand or management have been involved in. In particular, youÕll learn if any of the executives have committed a felony or been held liable for fraud, franchise law violations, deceptive or unfair practices or a settlement of civil actions surrounding the franchise covenant. Additionally, any action that has been taken by the brand against a franchisee is laid out here and may include lawsuits for non-compliance with franchise rules, failure to pay fees or trademark infringement. Bankruptcy Have any of the brandÕs executives had a personal bankruptcy, or been on the team of another franchise that filed bankruptcy? If yes, youÕll find out in this section. Which can be a potential red flag, and something you may want to learn more about. Initial Fees Here we move away from the people involved with the franchise and start digging into the financial requirements. The Initial Fees section is an important one, for obvious reason: here youÕll find out just how much this brand will cost up front. These fees can include the initial investment (often a range), deposits, inventory, equipment, signage, royalties and leases. If there is a range, sometimes this section will detail the determining factors for who pays what. If it doesnÕt, be sure to ask! Other Fees This section details out the fees that will come after all of the initial costs. Typically, these include advertising and training. For example, you may need to pay for transportation to and lodging during your training at brand HQ Ð among other thing. Initial Investment This information is presented in the form of a table, and brings together all of the fees that have been detailed in prior sections. Item 7 provides you with the final (estimated) amount that you will pay as your up-front investment. Restrictions on Sources of Products and Services As you know, the beauty of a franchise is in the tested repeatability of the model. Part of that repeatability is sourcing your products and services from the same place all of the other franchisees do, to ensure uniformity. This section lists the suppliers your franchisor has pre-approved. FranchiseeÕs Obligations This section details Ð you guessed it Ð all of the things you need to do to keep up your end of the bargain. It is an all-inclusive list of your obligations once you sign the contract with your franchise brand. Financing In Item 10, the brand will lay out any financing option they have. The terms and agreements are often very similar to that of a bank loan, with all of the attending pros and cons. Franchisors also often partner with companies or lenders that specialize in franchise and small business financing. Ask your brand who they recommend, so you can have a full picture of your financing options. FranchisorÕs Assistance, Advertising, Computer Systems and Training Here you will see all of the ways in which the franchisor will support you: training, marketing, systemsÉthe title really just says it all. Not all franchises provide the same amount of support Ð make sure your chosen brand provides the level of support you are looking for. Territory Franchisors often use a system of protected territories, which ensures no geographic area becomes overly saturated with franchisee locations. When you have a protected territory, only you will be operating with that brand in that territory. Not all brands use this system, however, and even the ones that do can be modified upon contract renewal. Trademarks This oneÕs easy Ð a list of all the trademarks and trade names associated with the franchise. Patents, Copyrights and Proprietary Information Similar to the above, this is a list of the patents, copyrights and proprietary information of the brand. (Again, itÕs all in the title.) Obligation to Participate in the Actual Operation of the Franchise Business This title is talking about your obligation. Can you hire somebody to manage your store for you, or do you need to be involved in the daily operations of your location? YouÕll find the answer in this section. Restrictions on What the Franchisee May Sell They didnÕt get too creative with these section titles, did they? But perhaps thatÕs for the best Ð these documents are complex enough as it is. Here youÕll see exactly which products and services you are permitted to sell at your location. This is in line with that whole Ôuniformity is keyÕ thing these franchisors have going on. Renewal, Termination, Transfer and Dispute Resolution Here is the outline of what will happen if you choose to renew your franchise agreement, terminate, transfer the rights to your location to another franchisee or need to resolve a dispute with your brand (fun stuff). Public Figures In the event your brand uses a celebrity or other Òpublic figureÓ for marketing purposes, this section will lay out the details of that agreement. Financial Performance Representations HereÕs where things get a little tricky: in theory, this section should tell you about the finances of single locations. However, most franchises do not disclose profits or income Ð and if they donÕt, they have to tell you that. (Yeah, itÕs super weird.) So, pay extra attention to this section and keep an eye out for things like location figures, gross sales, average earnings and how sales differ by region. Outlets and Franchisee Information This is your friend-making section, where the franchise provides a list of locations that have opened, terminated, transferred or cancelled within the last three years. YouÕll receive the contact information of these owners, so start making some calls! These individuals are excellent assets to you, and can shed light on what the day-to-day ownership of this brand is really like. Additionally, with this list you can see how many franchisees choose to renew or close Ð a telling statistic. Financial Statements But wait, you ask, didnÕt we go over finances in Item 19? Yes, we did Ð for franchise units. This section looks at the overall, combined financial health of the brand by providing audited balance sheets and profit and loss statements. This is another one to pay close attention to Ð particularly the income difference between sales and royalties (hint: sales income should be higher!). Contracts Here is a list of each agreement you will be required to sign to become an official franchisee. Receipts And last but not least, youÕll be required to sign a receipt that confirms you have received the Franchise Disclosure Document You can also take a look at real or sample FDDs through online resources like this one. And, again, we highly recommend you go through any FDD youÕre considering with an experienced franchise attorney. Okay! We know that was a lot Ð thanks for sticking it out. On to the next chapter: figuring out how to pay for this. Visit www.dromise.com

Tags: NA