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Franchise your Idea!

Of course, one of the first steps in the process of franchising your business is to determine if your company is indeed “franchiseable”. As franchise developers, We can help you analyze your concept for its strengths and weaknesses. Through our 35 years of industry experience, we know what components are necessary to attract qualified Franchisees. We have developed several easy “tests” to verify that your company is a candidate for successful franchising. Should it be determined that your company is not yet ready to franchise, we can help you develop a list of action steps to better position your company for growth.

If you feel that more extensive planning is advisable prior to franchising your business, Venture Capital International also can create:

  • Business Plans
  • Franchise Plans
  • Feasibility Studies
  • Strategic Growth Plans

Most importantly, during the process of developing your franchise system, We will work with you to best structure your program to achieve your growth goals. Whether you want to sell thousands of franchises or only a few dozen; whether you want to keep your business or eventually sell it; whether you want to build a “personal” relationship with each Franchisee or not; it is important that the franchise program is properly organized in order to help you best achieve your specific goals and to match your own management style.

Scope of Initial Franchise Project  The initial project will be comprised of the following services: • Draft the franchise agreement and any other agreements a new franchisee may sign. • Draft the franchise disclosure document (FDD). • Apply for federal trademark registration. • Form a new entity to be the franchisor. • Prepare an intercompany license agreement between the company that owns the trademarks (and operates the company restaurants) and the newly-formed franchisor entity. The bulk of the work that we do is described in the first two bullet points above – drafting the franchise agreement and the FDD. We will send the client a detailed questionnaire at the outset that poses the questions we need to address in the FDD. We will prepare a single-unit franchise agreement and a separate multi-unit agreement. If the client would like an area representative agreement, we would need to prepare a separate FDD. In an area representative arrangement, the area representative pays a fee for the right to recruit and manage the unit franchisees in a defined geographic area in exchange for a percentage of the franchise fees that the unit franchisees pay to the franchisor. The unit franchise agreements are signed by the unit franchisees and the franchisor, not by the area representative. Most franchisors do not use area representative agreements. We saw no active trademark application for Company in the online system of the U.S. Patent and Trademark Office. This application should be submitted right away. The new franchisor entity should be formed shortly before the documents are scheduled to be completed. The entity should open a bank account and an audit of the opening balance sheet should be prepared for inclusion in the FDD. (In some cases, the audit can be delayed, and the first FDD can contain an unaudited opening balance sheet.) Having a separate franchisor entity provides limited liability and separates the company-owned business from the franchised business. The two companies should be commonly owned. The franchisor entity should not be a subsidiary of the entity that owns the company locations. State Franchise and Business Opportunity Filings Before the client can sell franchises in California, the offering must be registered with the state. Several other states also require franchise registration before franchises can be sold in those states. A few states require franchisors to submit exemption filings under their state business opportunity laws. We would handle all of these filings and registrations. 2 Additional and Ongoing Work Additional work that we might provide at the client’s request includes, for example, providing advice regarding franchise sales laws, assisting the client in preparing and negotiating individual franchise agreements with specific franchisees, updating and revising the FDD and preparing and filing amendments and annual renewals to the client’s state franchise registrations as material changes occur and after each annual audit is completed, and extending the franchise program abroad. We can also advise the client with respect to the securities laws as capital is raised, and we can represent the client in resolving any disputes that may arise.

3 Responses to “Franchise your Idea!”

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