Franchising Frequently Asked Questions

The Franchise Maker is a franchise development firm that specializes in turning businesses like yours into a franchise package.  The franchise Maker provides the complete solution for businesses that want to experience accelerated growth through franchising and has assembled teams of professionals to assist with every aspect of franchising at reduced rates.  The franchise Maker does not sell franchise opportunities, does not use third parties to create franchise disclosure documents and does not ask for a percentage of your company as compensation (fee based services only).  The Franchise Maker is a professional franchise development firm that makes franchising easy, fun and affordable.

Perhaps you have identified a new way to provide a service or you have a unique product offering, businesses franchise for many reasons.  Some of the most common reasons to franchise are: If you have ever thought of expanding your business into other markets, but do not want to take on the cost of opening up satellite locations. You are passionate about what you do and really want to teach others how to operate a business like yours. You have hired employees only to find that once they leave you they become your competitors and you then realize you should be charging for such knowledge.  Franchising is simply a method of distribution and The Franchise Maker will identify if franchising is the best vehicle for you. 

Quite simply, to save time, money and aggravation!   The Franchise Maker will customize services to meet your needs.  The Franchise Maker will provide you with all of the facts and unbiased information you will need to successfully duplicate your business.  The Franchise Maker will take on the role of coordinating all the pieces that will result in a complete franchise package from the creation of disclosure documents to a comprehensive training program for future franchisees. 

Anything you do involves risk.  The Franchise Maker helps you to minimize that risk.  More than half of all new franchise systems fail each year.  Some of the most common reasons for failure are due to lack of effective systems, training and corporate support for franchisees.  Franchising is not simply about buying a template package of franchise forms and selling franchises.  Those who do not take the time to orchestrate all the pieces correctly, do not take the franchise development process serious and try to bootstrap operations have a greater risk of failure.

As a franchisor, it is your responsibility to provide all the tools and continuous support necessary for franchisees to succeed.  Franchisees are your customers.  Your success as a franchise system is dependent on their success as an operator.

Both Federal and State Governments regulate franchises.  This means that every franchise system is required to provide prospective franchisees with a disclosure package referred to as a Uniform Franchise Disclosure Document (UFDD).  This is one of the things that separate a franchise system from a licensed opportunity and why so many people invest in franchises.  Franchise systems are regulated to protect the franchisee, have a lower risk of failure and gives added creditability to your business model.

The Franchise Maker may determine that Franchising is not your best option.  It depends on the business model and your desired end result.  There are strict guidelines that define a franchise system and severe consequences for businesses that are licensed opportunities that act like a franchise.  If you do not meet these guidelines, perhaps licensing is a better option.  The main advantage of being a franchise system is the level of control you have over the entire system.  If branding your business, collecting a fee and consistency of product or service is essential then franchising is the best way to go.  When a business is a licensed opportunity, these key elements are lost.  

Related article: License or Franchise: There are a few differences.

The main advantage of being a Franchise System is the level of control you have over the entire system. If branding your business and consistency of product or service is essential then franchising is the best way to go.  Franchising is simply a vehicle used for rapid expansion.  Besides entrepreneurs using their resources (money) to start your business in another area, they have a vested interest to make it successful.  When franchising is done correctly, it is not unusual for franchisees to have businesses more successful than the franchisor and the loyalty built within the franchise system is priceless.

Remember that franchising is counter cyclical to the economy.  History has shown that when people lose their jobs and/or their security is threatened they turn to entrepreneurial thoughts.   Remember the perception of franchising is that it is “safe” therefore making it an attractive offer.  Add on top of that, franchise concepts that are home-based or mobile requiring very little overhead expenses and we have the ingredients for a perfect franchise sales climate.   Smart franchisors understand the opportunities in a down economy and will take advantage of them.

Absolutely.  As a franchisor you will not disclose any financial information for your existing business however, as a franchisor you will need to show financial stability.  You must be funded beyond the franchise development stage of becoming a franchisor.  At minimum, you must show financial strength to provide for the obligations you will have to your franchisees which will include: franchise training, administrative and pre-opening operational support, ongoing research and development to enhance the entire system.  Let’s not forget to mention that UFDD requires current unaudited financials of the franchisor. How much you fund your franchise system takes into account many factors (more on that later).

You must have a strong desire to teach others and you should have been in business for at least one year.  Having a second location in operation is advantageous, although not necessary.  Franchising is a business in of its self.  Your business model must have a unique selling proposition with tangibles clearly identified.  Franchising is not for everyone and does require enormous amounts of time, energy and commitment. You must be committed to advertising and marketing for your franchise opportunity. These are issues The Franchise Maker will cover in the initial free consultation with you.

To franchise your business, The Franchise Maker will have to learn about your business.  We will ask you a series of detailed questions. Creating your franchise structure, when done right, is simply a series of systems.   Below is a small sample of what to expect:  

• Identify and document specific variations of your business model
• Identify various profit centers within your business
• Identify proprietary products and/or systems
• Define specific obligations of the franchisee and your relationship
• Breakout and define total investment requirements, territory to be awarded, term and renewal
• Create all the necessary legal disclosures- UFDD and Franchise Agreement
• Identify the structure for technology such as web portals
• Collect and organize every piece of operational material into a Franchise Operations Manual
• Collect and or create support materials for franchise pre opening materials
• Create a comprehensive discovery day and training program
• Identify a complete qualification process for potential franchisees

Not only will you benefit from our process, but also from our team of professionals, all our resources, experience and knowledge. Not to mention, you are not spending a small fortune to franchise your business and we offer a Pay-As-You-Go full service franchise development program. Our franchise development program is geared towards results and is broken down into various phases. We would much rather see you spend your resources fine tuning various pieces that make your system stronger rather than spend a fortune to franchise it. Our franchise development program is unique in that does not trap you into having to do everything we offer and shifts the risk on us to perform for you.

The answer is simple. Rather than use your money opening satellite locations and hiring employees, who do not care about your business to run it, use the resources of an entrepreneur who has skin in the game, to brand your business using their money.  As a Franchise system you maintain control and it is the optimal way to expand your business into other locations.

The unpredictable is registration of the Franchise system in registration States.  There are fourteen States that require a stricter registration process to begin offering for franchises for sale.  For example, California is the strictest of all fourteen States and the approval process to begin offering the sale of Franchises in California can take a few weeks or a several months depending on who is assigned to review the FDD and how well the FDD is written.  We have had tremendous success in California.  Each registration State is different and timing for approval can vary.  So far in our experience, it has only taken a few weeks.

You must be a business owner who is passionate about wanting rapid growth, branding, have a strong desire to teach and provide a proven method of obtaining success for others.  Your business must be in operation for at least one year and have a unique selling proposition.  Often times it’s the most common product and/or service with a unique twist that lends itself well to franchising.  In other situations, your business could be “the first of its kind” and if that is the case, then you had better give us a call before someone else with your same business model franchises it before you.

Some would say the biggest pay-off is money and wealth.  I would say that after seventeen years of Franchise experience and my involvement with large franchise organizations with hundreds of locations strong, that the biggest reward is the tearful testimonial of a franchisee who, when being recognized for their achievements, stands up and says; “If it was not for XYZ company, I would not be where I am today.  I am successful, happy and making a good living doing what I love while putting my children through college."

The Franchise Maker is sensitive to your needs to minimize costs and believe you should spend your money on initiatives that will further enhance your entire franchise system.  Fees for services are broken down into different phases and you pay as each phase is completed.  This is a Pay As You Go program where you do not have to commit to a large sum of money up front.  After receiving a small retainer, we begin work immediately.  Typically the franchise development process takes 45-90 days before you are ready to sell franchises. Our compensation program gives clients added confidence in our services since the risk is shifted on us to perform for you.

Once The Franchise Maker has defined your business model and you fully understand all the steps necessary to franchise your business, you can start immediately.  The Franchise Maker will move as fast or as slow through the process as you dictate.  The Franchise Maker can only be as effective as the level of commitment given to us by you and your staff. 

Franchising Information, terms and definitions can be hard to find all in one place. As a Franchise Expert, we have strived to include below, most of the more common Franchising terms and their definitions.

Acknowledgement Of Receipt: The last page of an Offering Circular. It is signed by prospective franchisees and returned to the franchisor as proof that the franchisor delivered the UFOC on a certain date.

Advertising Fee: A periodic fee charged by some franchisors to fund advertising and other marketing programs for the franchised business. May be based on a percentage of the franchisees’ revenues (typically less than 3%) or a flat fee, and may be due weekly, monthly, quarterly or annually. Fees may be applicable for local and/or national advertising.

Affiliate: An entity controlled by the franchisor, or that controls the franchisor, or that is under common control with the franchisor. The franchisor’s original operating company could be deemed an affiliate.

Company-Owned Unit: Business unit owned and operated by the franchisor or its affiliate, that is similar to the franchised units. This would also include any franchises purchased by the franchisor from an established franchisee.

Conversion Franchise: A franchise that is sold to an existing business to allow that business to convert to a franchised business. An example of this is Century 21 Real Estate or ARA Real Estate.

Disclosure Laws: State and federal laws that require franchisors to provide certain information to prospective franchisees before the sale of a franchise. These laws will vary from state to state with some states charging fees for registration or filing.

Earnings Claim: Any information that a franchisor gives to a prospective franchisee from which a specific level or range of actual or potential sales, costs, income or profit can be easily ascertained relating to franchised units or company-owned units. An earnings claim document must be made part of the UFOC and included in state registrations.

Federal Trade Commission (FTC): The federal agency in Washington, DC that regulates franchises. www.ftc.gov

Franchise: The legal rights a franchisee obtains whether from a franchisor or by transfer from another franchisee under a franchise agreement.

Franchise Agreement: A contract between a franchisor and a franchisee, in which the franchisor grants franchisee certain rights to use the franchisor’s marks and system in connection with a business to be independently owned and operated by the franchisee.

Initial Franchise Fee: One-time fee that franchisee pays to the franchisor for the right to use the franchisor’s marks and system, and for certain products and services.

Operations Manual: The information a franchisor provides to its franchisees in printed or electronic form regarding the operation of the franchised business.

Registration: The process of filing franchise documents with official state franchise regulators as required by state law. In many states with franchise registration laws, registration is not effective until the franchisor’s application is approved by the state franchise regulators.

Royalty Fee: An ongoing fee the franchisee pays to the franchisor for ongoing services, typically based on a percentage of the franchisee’s revenues, and paid weekly or monthly.

UFOC: The document that includes information about the franchisor, the franchised business, and the franchise agreement prepared under the requirements of federal and state disclosure laws and the UFOC Guidelines.

UFOC Guidelines: The instructions and other requirements issued by NASAA (and approved by the FTC) for preparing a UFOC. www.ftc.gov