Franchise Essentials Development Program
The Franchise Essentials Program was designed for companies that desire the support of experienced franchise professionals to assist in developing the franchise operation and take it to market. The Essentials Program reduces the amount of capital required to complete the development by permitting a portion of the development fee to be paid as a percentage of the first six franchises sold. We actually defer almost 40% of our fee until the client's franchise sales commence! We believe it is helpful to our clients to defer a portion of the cost until the franchise operation begins generating revenue. It also demonstrates our commitment to helping our clients build successful franchise operations.
Under our Essentials Program, all key components of the development project are coordinated and completed by FranSource, including providing sales assistance for the first six franchises sold. The services provided by FranSource under the Essentials Program address every aspect required to establish a successful franchise operation. The projected time frame for the development project averages three to five months. For additional information and cost, please contact us.
The Essentials Program includes the following services:
Research of the Business and Industry
FranSource completes a comprehensive review of the client’s business and industry relative to the franchise operation and structure. A competitive analysis is also produced relative to similar type franchise companies.
Preparation of the FTC Disclosure Document and Franchise Agreement
There are 23 “items” required to be disclosed in the FTC Disclosure Document concerning the franchise company and provisions contained in the Franchise Agreement. The system and processes (including questionnaires and interviews) used by FranSource when developing and drafting the Disclosure and Agreement ensure that all aspects of the client’s system are fully identified and properly disclosed. FranSource fully advises the client concerning specific provisions of the franchise relationship.
The Franchise Agreement and Disclosure Document are prepared in conformance with FTC guidelines. This enables the client to begin selling franchises in 35* states upon completion of the documents. The remaining fifteen states have registration requirements in addition to those dictated by the FTC that must be met in order to solicit and sell franchises (see “Registration of the Franchise” in the Optional Services section below).
Commencing July 1, 2007, the Disclosure Document will be drafted in compliance with the revised FTC Franchise Rule (Jan. 2007). All franchise companies are required to follow the new Rule effective July 1, 2008. However, Franchisors are permitted to use the new Disclosure format commencing July 1, 2007.
NOTE: Additional requirements must be met in order to offer franchises in eight of the 35 “non-registration states.” Five states require franchise companies to file a simple Business Opportunity exemption notice prior to selling franchises in the state (see section “Filing of Required State Exemptions” below). Three states (CT, NC, and SC) require a franchise company to file under the state’s Business Opportunity laws if the company does not have a federally protected trademark. Contact FranSource for additional information concerning these requirements.
Preparation of Exhibits to the Disclosure Document and Franchise Agreement
The following Exhibits are prepared as required:
Deposit Agreement
Non-Competition Agreement
Site Selection Addendum
Franchisee Compliance Certification
Lease Assignment Agreement
List of State Administrators
List of State Agents
Telephone Number Assignment Agreement
List of Franchisees and Area Developers
Operation Manual Table of Contents
State Specific Addendum to the Disclosure Document
State Specific Addendum to the Franchise Agreement
The State Specific Addendum to the Disclosure Document and Franchise Agreement are prepared by FranSource as part of the legal development process to ensure the client’s compliance with individual state franchise laws when registering in the 15 registration states. The State Specific Addendum address the individual state franchise laws and regulations.
In addition to the Exhibits listed above, certain financial disclosure requirements must be met by the franchisor. A newly formed franchise entity is permitted to provide an audited opening balance sheet and non-audited financial statements for the first year of the franchise operation. Please contact FranSource for additional information.
Preparation of the Area Development Agreement
An Area Developer program permits the company to sell multiple franchises to a single franchise for development over a prescribed time period. A percentage of the franchise fee for each franchise to be opened is typically paid in the form of a Development Fee upon execution of the ADA (and is normally non-refundable). The Area Development Agreement (“ADA") is prepared as an exhibit to the Disclosure Document. In doing so, disclosure requirements are met and multiple-unit opportunities are immediately available to the client. FranSource advises the client concerning the appropriate structure, requirements, and policies for the Area Developer program.
Preparation of a Nondisclosure for use during the sales process
FranSource prepares a nondisclosure document for use during the sales process to help ensure the protection of the client’s confidential and proprietary information. This form is typically provided to prospective franchisees early in the sales process to enable the company to share information that may be more confidential in nature.
Establishing Franchise Reporting Requirements and Performance Standards
FranSource advises the client in determining appropriate reporting requirements for the franchise business. Franchisees may be required to provide information to the franchisor regarding sales revenues, royalties, financial data, income and sales tax returns, and other information deemed relevant by the franchisor. In addition, FranSource provides considerations and recommendations regarding minimum performance standards or inventory purchasing requirements when appropriate to the franchise business. When performance standards or inventory purchasing requirements are implemented, FranSource drafts the appropriate provisions for the Disclosure Document in compliance with FTC guidelines.
Determining the Exclusive Territory
Franchise companies typically grant Franchisees an "exclusive protected trade territory" as determined by the Franchisor using established criteria. FranSource helps define the criteria and system used to establish exclusive franchise territories. The Disclosure Document and Franchise Agreement detail the exclusive territory granted while providing flexibility related to factors that may impact the exclusive territory or the location of the franchise business.
Establishing Site and Location Specifications for the Franchise Business
Franchisors have the right to dictate the type, style, size and other criteria of the franchise location. FranSource assists the client in establishing appropriate requirements and developing site selection processes and procedures. FranSource also drafts a “Site Evaluation Form” to be completed by Franchisees and submitted along with additional documentation for approval of the proposed location. For home-based franchises, FranSource assists in determining appropriate policies for establishing a home office.
Determining the Franchise Fee, Royalty, and Other Sources of Franchise Revenue
FranSource advises the client in determining appropriate franchise fees, royalties, advertising fees, and other sources of franchise revenue. Information is also complied from similar type companies for comparison purposes.
Filing Required State Exemptions
Of the 35 “non-registration states,” five states require franchise companies to complete an “exemption filing” prior to commencing the sale of franchises in their state. FranSource completes the required applications for the five states.
The states include:
Kentucky
Utah
Texas
Florida
Nebraska
The Confidential Operation and Policies Manual
One of the keys to a successful franchise operation is a standardized system that franchisees follow to ensure consistency and quality throughout the organization. An “Operation and Policies Manual” is one of the most effective methods of conveying policies, procedures, and operating systems to new franchisees. Existing franchisees also benefit from a comprehensive Manual relative to the ongoing operation of the franchise business. The Manual saves valuable resources at the corporate level by minimizing the time personnel spend responding to Franchisees questions. When properly implemented, the Manual also ensures greater consistency between the independently operated franchise locations.
The Confidential Operation and Policies Manual produced by FranSource acts as both a training guide for new franchisees and an operations and policies guide for established franchisees. The FTC permits the Manual to be a unilateral extension of the Franchise Agreement. This allows the Manual to serve as the vehicle through which the franchisor may modify policies, processes, procedures and other "nonmaterial" aspects of the franchise business or system. Recognizing the systems change and evolve, the pagination system used by FranSource is specifically designed to allow for easy updating as modifications and enhancements to the system are implemented.
FranSource determines the content and design of the Manual through the use of questionnaires, interviews, and onsite visits with key personnel. The content of the Manual includes pre- and post-opening information, instructions, policies, and procedures. Forms and other materials used in the operation of the franchise are also included. A completed Manual averages 200-300 pages in length. Upon its completion, FranSource provides the client with the electronic files of the Manual (i.e. Microsoft Word and Excel).
Initial Franchise Training Program
FranSource assists the client in developing an initial training program for new franchisees. A training itinerary is drafted which outlines the training content, hours devoted to each topic, and other related information. Training may be conducted at both the corporate office and at the franchise business. The training itinerary is included in the Disclosure Document in compliance with franchise regulations. FranSource also provides assistance in defining and establishing appropriate training requirements for employees of the franchise business.
Franchise Sales Procedures / Production of the Franchise Sales Manual
FranSource advises the client in establishing appropriate franchise sales procedures. As part of this process, FranSource produces a Franchise Sales Manual which overviews the client’s franchise development process. The Manual is designed for use by franchise personnel as both a training manual and an ongoing reference guide.
Legal Compliance
FTC sales disclosure requirements are reviewed with the client to help ensure compliance with federal franchise laws and regulations. In addition, FranSource produces a Guide to Executing the Franchise Documents to ensure their proper disclosure to, and completion by prospective franchisees.
Franchise Sales Forms
FranSource produces various forms and materials for use during the franchise sales process, which may include:
• Preliminary Consideration Form |
• Franchise Application |
• Introductory Letter / Email |
• Financial Information Form |
• “Discovery Day” Itinerary |
• FAQ’s – The Opportunity |
• Franchise Acceptance Letter |
• Due Diligence Checklist |
• Franchise Welcome Letter |
• Disclosure Document Request Form |
Franchise Advertising & Marketing
FranSource provides assistance in establishing the initial franchise advertising and marketing plan and advises the client concerning appropriate programs. Assistance includes:
Reviewing appropriate advertising and marketing programs with the client
Analyzing and ranking various Internet franchise advertising portals for review with the client.
Preparing an Internet Advertising Plan for the client based on a specified monthly budget.
Negotiating advertising rates with Internet franchise advertising portals. On average, FranSource clients save over $8,000 annually based on discounts negotiated by FranSource.
Producing an advertisement for use on the selected franchise advertising portals.
Directing the client in submitting applications for national franchise publication listings.
Franchise Opportunity Section of the Web Site
FranSource provides design and copywriting assistance to develop a Franchise Opportunity section on the company’s web site to promote the franchise. If required, FranSource offers complete web site development and design services. This includes the capability of creating “home pages” for franchisees which permit them to customize a front page on the company’s website specific to the franchisee’s location. Please contact FranSource if you would like to discuss additional web site development.
Franchise Sales Assistance
FranSource provides assistance with the franchise sales process for the first six franchises sold. Issues relating to disclosure, agreement negotiations, territories, and other aspects of the sales process are addressed as required. Three-way conference calls are conducted with prospective franchisees and the client as needed.