The Significance of the Franchise Agreement Document

You probably already know how important the franchise agreement document is in and of itself, but it’s best to take a look again at the significance of this stage.

Franchises are a unique form of business, and one that came about only when capitalism took hold in modern marketplaces in the last couple centuries.

A franchisee has responsibility not only for their business and reputation, but also to the parent company which they represent. Any reputable company has a high standard of quality, not only in the service, but also for internal workings and competence at operating the business on the corporate front.

Considering that, your franchise agreement document can say much about the quality you will bring to the company well before your business opens. The legal or business team at the parent company will at any rate subconsciously judge your attention to detail and quality by what this document itself conveys.

Bearing this in mind, there are several points of quality to consider, beyond the content of the document.

 Various Points of Quality in your Franchise Agreement Document

There are several points of quality you should consider, and it’s not uncommon to overlook at least one of these, given this document is mostly business and not sales.

First is the most obvious point, that being spacing and the amount of wording per page. If there is too much text on a page, it is overwhelming, and no matter how much people like to read, they will be put off by this. It’s ok to have more pages in the document if it means cramming less text on a page. The type font should look good, but not be overly ornate as well.

Second, consider your letterhead in your franchise agreement document. Handsome but not overly-prominent letterheads go a long way to give the document a professional feel.

The material upon which your document is printed should be a solid, long-lasting paper that feels and looks important, showing how critical you regard this document.

Lastly, your format for the digital copy is very important as well. We’re getting closer to the paperless office as the years go by. When choosing a format, above all security matters. Something that is hard to alter without permission is very important, and few formats can guarantee this without much inconvenience.

That brings us to the other point of importance in formats – convenience. A format that can be easily read from just about any device shows that you will spend extra effort on making things convenient for customers or business associates. PDF is a good format on both of these counts. It is hard to alter one, and almost everything can read them.

Showing this extra attention to detail and willingness to go the extra mile for something that only internal staff will see will take you a long way to earning the trust of the company you wish to represent.

The legal framework and charity formation of the Netherlands

The legal framework and charity formation of the Netherlands states that the word charity means to the tax qualification of an entity which nearly pursues a people purpose. It is referred to as an ANBI ALGERNEEN NUT BEOGENDE INTELING or a general interest pursuing organization. The implementation of an ANBI has no bearing in company law or civil law. But implementation is found in the general code of tax.

The regulations and the charitable purposes in Netherlands show that whether an entity is fulfilling a people purpose or not is a matter of face and the constitutional files of the entity are correct in this context. The donor relief and taxation policy is that the donations to qualifying ANBI are exempt from inheritance tax and donor tax.

Donations by qualifying ANBI are exempt from donor tax if the rules are met for exemption. The Netherlands also do philanthropy work internationally.

It is worthwhile to think about using a Heads of Agreement Template when ironing out your business relationships prior to starting a franchise partnership.

While the Heads of Agreement Template is not always used when a franchise relationship is in the works, the format of this business tool may be valuable.  One way that you can put the Heads of Agreement Template to work is by getting it into the discussion if there are some sticking points between major potential franchise partners about how the franchise relationship will roll out once the franchises are open and big money is being made. In a similar way that the franchise agreement is meant to protect each player in the negotiation, the Heads of Agreement Template can play that same role in the drama.

It is really up to the business offering the franchise and the one that is out there to buy that franchise as to whether a Heads of Agreement Template should serve as a replacement for a standard franchise agreement or as yet another layer of franchise documentation going into the partnership. Since the Heads of Agreement Template is a format that is well known to most top dogs in the business world, it may be an agreeable format to use if things are dicey in the discussion and there is a need for a little extra punch to seal the deal.

Depending on how many areas of disagreement need to be hashed out, the Heads of Agreement Template can become complicated and lengthy.  In order for the document to be usable as a franchise agreement, however, the language used when working up a good Heads of Agreement Template for a franchise relationship must be light on the legal jargon and understandable by the average person. That is both common sense and it is part of franchise law as well.

The Heads of Agreement Template is formal but it is flexible.

 

The different areas that the Heads of Agreement try to get both parties to work together on focus on responsibilities, resolution of disputes and, of course, money.  By using the Heads of Agreement as a franchise document, you can get very picky about including the structure of both companies who are butting heads and how much cold hard cash is going into the new partnership which in this case is a franchise relationship.

Many times the Heads of Agreement helps when both the potential franchisee and franchisor are suspicious enough that they need it in writing how disputes will be settled and who is responsible for what and when.  In some applications of the Heads of Agreement, 14 different legal clauses can be included in the final document and each of those could break down into a lot of detail to get on paper.

It should be noted that the use of the Heads of Agreement does not require that the franchise negotiation get ugly and it isn’t written in stone that you have to use every clause that was ever invented to go into the Heads of Agreement. It is up to the franchisee and the franchisor to use this business tool and use some common sense as well so that it helps them shake hands and come out of the meeting room with smiles on their faces because a lot of money is about to be made. If everybody is an adult and uses the Heads of Agreement to hash out a sweet franchise deal, everybody can be a winner.

Find how franchising a small business can lead to success

Franchising a small business is a method of opening up your business to other areas through granting another entity the right to sell your goods or services in the location they are situated. For many this may sound like the other party has a great deal because they are using your brand name to sell products and services, but it does also give a great deal to your small business too.

 

If you are thinking of franchising a small business then take note of the fact that the new party who wishes to take a franchise of your business will need to invest money into the venture. The amount of this investment is up to you and will involve the setting up costs of the franchise and some extra to put back into your business.

 

Another positive note about franchising a small business is that your business name will also gain more exposure as the person investing in your franchise will retain your business name as part of the deal. This means over time your business is branching out through your franchise partners and the exposure of your brand name will improve greatly.

 

What do you need when franchising a small business?

 

Well the first thing you need to do when franchising a small business is to find a niche where you can garner interest from people wishing to start their own business up and who will like your business model. This will mean they would be happy to pay for the privilege of starting their own business while having a license to use your business model and name to make it work.

 

Once you have decided that you wish to franchise your business you then need to review the legalities of the franchise to make sure your protected in both financial and liability areas of the business. To do this you will need to gain a legal franchise agreement, something you can pay lots of money to a lawyer for, or simply use prebuilt templates like those found here at Franzoom.

 

As well as the legal franchise agreement, when franchising a small business you will also need a franchise operating manual, another prerequisite that many miss when starting their franchise venture.

 

Is franchising a small business for me?

 

If your business is one that has a market with a long shelf life, has high gross margins and doesn’t require a lot of training to achieve success then you could find your business is a good model for franchising a small business. Those franchises which are the greatest success are those where customer loyalty means they keep coming back for the product or service delivered.

 

If this sounds like your business then why not think about franchising a small business?

Also, a project management degree is always a good idea to gain the knowledge necessary to make the right moves.

Using a FDD Template to Franchise your Business

If you own a unique business and expansion is on your horizon, you may be in need of a FDD template to franchise your company. In today’s competitive marketplace, you have to look at the best methods available for expansion at the lowest cost. Franchising your business offers a perfect blend of being able to open more locations quickly without the need to incur the cost on your own.

 

In order to successfully franchise your business, you must make certain you have all of the correct documents and tools in place. The FDD template or franchise disclosure document template is one of the items you will need. This template provides instructions regarding the disclosure of information that is required to meet FTC guidelines. In most cases the FDD template contains multiple chapters in addition to samples of the information that is being released.

 

Entrepreneurs with experience in franchising often admit the FDD is one of the most challenging aspects of the franchising process. What often makes creating the FDD so difficult is the number of very strict rules the FTC sets in place. Trying to comply with those rules can often be difficult. When you take into consideration the fact that every state also has its own rules, it is easy to see why creating your own franchise disclosure document can be so difficult and why many people choose to use a FDD template instead.

The Right Template can Protect your Franchise System

While it is possible to use a sample FDD template that you might find online, once you begin to carefully examine these templates you will find they lack several important elements. Many are generic and simply do not offer the level of legal protection you need. An effective FDD template should be completely customizable. It should also be prepared by an experienced attorney and franchise expert that is familiar with all of the rules and laws relating to FTC compliance.

 

The FDD template is a critical part of the franchising process that should be completely correct the first time. This is the document that forms the foundation of the franchise agreement and therefore determines the success and growth of your entire franchise system. Ensuring you have the right FDD template can help you to establish your franchise system now and protect it in the future.

 

 

How to be a franchisor with hundreds of franchised units?

Small business owners and entrepreneurs looking for new business opportunities often wonder how to expand their business and how to generate more revenues. Often, these simple goals turn out to be impossible due to lack of time and lack of finance. Opening even a couple of additional business branches usually means a lot of money for inventory, equipment and staff and more long hours of work to set and control their operations.

These two major problems – time and money, can easily be overcomes if the business is franchised. Franchises tend to grow much faster. The real advantage of owning a franchise is that you can have hundreds or even thousands of units without investing your own money and without spending your time.

The most common question asked by anyone who conspires starting a franchise is “How to be a franchisor if I don’t have any previous experience in this field?” the good news is that it is really simple to be a franchisor even if you have never heard of franchising before.

How to be a franchisor? The basics of starting a franchise from a scratch

You can be a franchisor even if you have never been a business owner before. Starting a franchise business is probably easier than franchising an existing business. The first thing you need to do is to come up with a good business idea. Once you know what your products or services will be, you need to put in place the basic franchise documents. You cannot be a franchisor if you do not have a professional franchise operations manual and a franchise disclosure agreement. These can be prepared effortlessly if you use ready-to-use franchise templates. The third thing you need to do before opening for business is to register with the state authorities.

How to be a franchisor if you already have a company?

If you already have a company and what to be a franchisor, you will need to transform your current business. Although this sounds easier than starting a franchise from a scratch, in many occasions it proves to be more difficult. You will need to review all your company policies and operations and make sure they are executed in a way that can be followed by franchisees. What this means is that you will have to detailed and easy to follow system of rules regarding the way every simple aspect of your business operations is executed. Small business owners usually do not have such systems in place because of the scale of their business operations. Once you have this settled, you can proceed to preparing the franchise documents you need to register and launch your franchise.

What if you want to be a franchisor without opening your own franchise business?

You may decide that running your own franchise is much more than you can or want to handle. What you can do in this case is to invest in somebody else’s franchise. This way you will be a franchisor but you will be able to decide how involved you would like to be.

Uniforn Franchise Offering Circular (UFOC)

FYI – As of now UFOCs may no longer be used for franchise sales anywhere in the U.S. – FDD is the new format.

One of the most difficult steps in setting up a franchise business is the preparation of your franchise documents. There are various documents that each franchisor should have in place before they launch the business officially. Some are documents that are good to be in place since the beginning just to set all aspects of the business in a working system. Other documents are required by the Federal Trade Commission and having them ready is obligatory.

One of the most challenging documents in terms of preparation is the so called Uniform Franchise Offering Circular (UFOC), most popular as franchise disclosure document. The UFOC must be prepared in advance and audited by an independent audit company. Only then the franchisor can go ahead and register their franchise business in the states where filling is required.

In most of the cases some professional help is required when getting a UFOC ready. Whether or not you will use the services of a franchise consultant or a franchise attorney, it is good to have at least a basic idea how to write your company’s UFOC and what information should be included in it.

Uniform Franchise Offering Circular (UFOC) Key Points

• The cover page. The cover page must be prepared according to the Federal Trade Commission Franchise Rule. It must contain the name of the franchisor, the type of the business organization, principal business contact information, a sample of the primary business trademark and some prescribed statements. There must be a reference to ite5 and item 7 as well.
• The Table of Contents. A UFOC Table of Contents must refer to all items included in the UFOC, and each one should be marked with a number. All exhibits are marked with letters.
• UFOC items. Each part of the disclosure document constitutes a separate item. There are 23 items in a UFOC. For example Item 5 and Item 6 disclose information about fees, Item 7 – initial franchise investment, Item 9 states what franchisee obligations are, Item 11 provides information about the franchisor’s assistance available to franchisees, Item 13 discloses information about trademarks, Item 17 is about termination and renewal terms, Item 21 discloses franchisor’s financial statements and so on. There are specific requirements about how each part must be structured and what information should be included.
• Item 21 – franchisor financial statement. Preparing the Financial Statement is one of the most challenging tasks. It must include copies of the franchisor’s financial statements for the last three years and these statements must be audited by a third party according to the generally accepted accounting principals (GAAP). The aim is to provide prospective franchisees with more information about the franchisor financial situation. While gathering the required information is usually not a big problem, getting it audit may turn into one. Franchisors should make arrangements way in advance as late audits are the most common reason for delays. Keep in mind that the GAAP may be changed or revised and this is why you may be need to seek the advice of an experiences franchise consultant who can help you getting this part of the UFOC ready.

Franchise Disclosure Agreement Update Tips

The franchise disclosure agreement is the backbone document of all franchise operations and procedures. It is this document that guarantees your business is managed just the way you want by all of the franchisee partners as well as protects your business identity.

Preparing the franchise disclosure agreement is not an easy task. Apart from the fact that the document must address a lot of important issues, there are also some state and federal regulations that must be covered. This is why even experiences professionals often seek the help of franchise consultants and lawyers when writing or updating their franchise disclosure agreements.

Updating your franchise disclosure documents is also quite challenging. If need to update your franchise agreement, you surely can use some help. Here are a few useful tips that can help you throughout the process.

The most important aspects of updating a franchise disclosure agreement.

• Check federal and state regulations. The first thing to do when preparing or updating a franchise disclosure agreement is to check the federal and state regulations. Although you may still need to get the agreement reviewed by a legal consultant, this will help you write it or update it without missing any important details. There are many laws governing franchise operations. Although they may differ from state to state, in general you will need to update the agreement 120 days after the first year and than annually. Missing the state regulated deadlines can result in big troubles and huge penalties so check these as well.

• Check which parts of the agreement must be updated. There are some parts of the disclosure agreement that you will need to update even if there are no changes in the way your company works. For example you need to update item 2 for any changes in the key management, item 3 concerning litigation, item 4 – bankruptcy. You need to update the chapters concerning your opening costs based on recent expenses, the chapter regarding payments to suppliers, items regarding trademark and infringement information and the items concerning lists of existing outlets and terminations. All franchisee disclosure forms should also be updated.

• The annual audit. Each update should be accompanied by an annual audit. Call your audit partners as early as possible as leaving this for the last moment usually results in missed deadlines.

• Take advantage of the update. Updating the agreement is a real burden but it is also provides a great opportunity to review closely some of your operations. You are digging in forms and documents so you can easily go through all your franchise units contracts and check if any updates are needed there too. You can do the same with contracts you have with suppliers or other business partners. While updating the trademark section of the disclosure agreement, check the documents that concern protecting your grand names and logos and file or renew any applications to protect existing or new logos, brand names, trade marks or patents.

Franchise Tools That Can Ease Your Daily Work

While many believe owning a franchise business is just a piece of cake while the franchisees are pulling the real load, they are very wrong. Establishing a franchise and making it successful and profitable a challenge. There are so many issues to address and so many things to take care of that the full scope of work can make your head spin. Most franchise owners work day in and day out long hours managing their business.

A franchise business owner has to address many issues – does the system is working smoothly, does all franchisees are following strictly the company procedures, are they profitable and so on. In addition a franchise owner should always look for selling new franchise units, which ultimately leads to more work. Luckily there are some franchise tools that can greatly reduce the load of your shoulders.

Franchise tools that can help run a franchise business

There are several tools developed especially for franchise business owners that can greatly reduce their every day work.

Paperwork is usually one of the biggest troubles for any business owner. This is where products like Franzoom Disclosure Document tool can help you significantly. Such tools have the most important set of documents – the franchise disclosure agreement, done and ready to be customized to perfectly fit your operation requirements. Moreover owning such franchising tools can give you piece of mind that you are updated with the latest Federal Trade Commission regulations.

Other useful franchising tools are those designed to help franchisors create the so called “holy grail” of any franchise business – the operations manual. While writing this bulky document sounds easy, in reality it is a challenging task. A professionally written operational manual should contain a lot of information and cover all possible situations. This document not only outlines the way each of the franchise units must execute their operations but protects your business and controls the quality standards throughout your franchisees network. A franchise operational manual should be regularly reviewed especially when you are planning to expand your franchise. Franchise tools such as Franzoom Franchise Operations Manual can really help you creating and maintaining a professional operational manual.

There are many other franchise tools that can ease the everyday work of any franchise owner. Tools that can help protect your intellectual property, assess the viability of any potential franchise request, make background checks or keep you on track with current state franchise regulations can be real time savers.

Reading all of the above certainly brings a lot of questions to your mind and probably the predominant one is “How much would these franchise tools cost me?” Money always matters especially in times of bad economy. The good side of things is that there are some very affordable franchise tools Moreover if you choose to by franchise tool kits rather than purchasing tools one by one you can actually save a great deal of money. Additionally using specialized franchise tools will actually reduce the workload and you will be able to expand your business without expanding your workforce.

The Perfect Franchise Based System

What is it about that business model that first caught your eye? Was it the lure of easy money? The idea that you would be your own boss and not have to take orders from anyone but your significant other? Or maybe it was simply the right time and place to finally go out on your own.

A franchise system must envelope everything you want in a business but more importantly it should be extremely current as it pertains to technology and paperwork of the business. On the technology front, ask yourself if this franchise will need special equipment, or possibly expensive software to operate it. The cost of new machinery and software can be daunting and may not be included with your franchise payment.
The other being the paperwork. You are basically buying into a system that has been duplicated and currently working for the franchisor and his franchisees. If the paperwork is an important aspect of the business as it may pertain to sales contracts or other issues, then it is most important to the sustainability of your new business. If the paperwork falls short, so will your future business.

Have a close look at all contracts, policies, operations manuals and procedure manuals. See that all of these documents are current and include most items that one would expect in the business model you have chosen. They should also be numbered and belong to a system developed by the franchisor. Most new up-to-date franchises use systems like Franchising Magic to control their paperwork making it easier for them to add or edit paperwork on the fly enabling you to operate as you should. With the advent of system like these the franchisor has better control over the document system and therefore will be able to better handle your contractual requests.

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