10: Franchising your business

• Franchising potentials
• Advantages of franchising
• Franchising provides expansion capital
• Avoids employee related problems
• Accelerates expansion over wide area
• Franchisee operators are motivated to succeed
• Disadvantages of franchising
• Sharing profits
• Loss of absolute control
• Lawsuits with unprofitable and/or difficult franchisees
• State and federal franchise disclosure laws
• Prove profitability first in company operated stores
• Start with company-owned stores
• Requires profitability for both franchisor and franchisee
• Importance of conservative growth rate
• Should master leases be with the franchisor or franchisee?
• Importance of operating franchisees
• Avoidance of investor franchisees
• Special business skills required
• Screening of franchisees
• Real estate development
• Specialized legal council
• Training and operations management
• Area supervision
• Escrowing of franchise fees until unit opening
• Disclosure requirements
• Offering circular, franchise agreement and lease
• Audited financial statements
• Profit and loss statements from franchised stores
• Pending litigation with franchisees
• Contact information on past and present franchisees
• Top Ten Do's and Don'ts
• Session Quiz