March 25, 2015
It’s not uncommon for franchise brokers to be approached by businesses considering franchising. You are, after all, at the forefront of the franchising industry. As someone who is immersed in the market, you can provide valuable insight into the world of franchising and give insights into current trends.
A business owner needs to see a franchise lawyer once they start considering franchising. The earlier they bring a lawyer in, the more efficient the process will be.
An experienced franchise lawyer will quickly determine three things:
The answers to these three questions will dictate both if the business owner should pursue franchising and determine next steps.
Assuming the business model is a good fit for franchising, here’s how a lawyer can be instrumental in moving forward:
Foundational Work
There are several elements to the franchising process that you can’t control the timeframe. One in particular is acquiring the trademark. This can take 8-12 months. I always encourage completing this as soon as possible. That way the business owner is in the driver seat when franchising.
Other foundational work to complete prior to digging into the FDD is determining a franchise structure, outlining royalties, finessing a point of sales system, proving the system and more. I help business owners create the groundwork in a manner to set up their franchise for sustainable success.
Creating the FDD
This in-depth legal document can be as many as 200-300 pages in length. It creates a very specific financial and legal representation to prospective franchisees. It’s imperative that this be done correctly to avoid potential liability and give the franchise a good legal foundation.
Managing and Creating State Specific Registrations
Once the FDD is complete, franchisors will need to register with their state. Different states have varying requirements for franchise registration status. A franchisor needs to ensure they are in good standing with their state before selling any franchises.
And as a franchise grows, expanding beyond the initial state, documents and registrations will need to be altered to align with that state’s specific requirements.
As a co-owner in a franchise and a lawyer, I bring a unique perspective to approaching and crafting franchise structures and FDDs. Add this to my ten years of experience specializing in franchise law, and I can successfully guide business owners through the comprehensive process of creating a franchise.
If you have been approached by businesses looking to franchise, have them contact me today.
