Many people purchase a franchise with the understanding that they will be going into business for themselves and that there are a lot of benefits that come with owning a franchise. If you've done the research, you know that owning a franchise is a great way to own a business without having to lay all the groundwork necessary to open up your own company. Starting with a recognized brand, extensive training, tested products, and an established method of operation are just some of the things you can expect when you decide to purchase a franchise. What else should you expect from a franchisor?
Important Things to Expect From a Franchisor
- Franchise Disclosure Document: A franchise disclosure document (FDD) is a legal document. The franchisor must present an FDD to a potential franchisee before the sale of the franchise. An FDD consists of 23 disclosure sections. Under franchise law, the franchisor is obligated to disclose information about the franchisor, about the franchise, information regarding fees associated with the franchise, the legal relationship between the franchisor and franchisee, and other specific information. Under the Federal Franchise Rule, the franchisor must disclose the FDD to a potential franchisee no less than 14 days before the franchisee signs a franchise agreement or releasing any funds to the franchisor.
- Franchise Agreement: This is not the same thing as an FDD. The franchise agreement is a document drawn up by the franchisor and signed by both parties at the time of the sale. The franchise agreement contains clauses for everything relating to the franchise's sale, including rules about honoring the contract, fees and royalties, cost of the franchise, and an outline of protected territories. We recommend you use an attorney before you sign a franchise agreement unless you are sure you understand what everything in it means.
- Training: Most franchises offer a comprehensive training program that helps ensure the success of the franchisor. The training provided by the franchise might be covered in the franchise agreement, or it might be covered in a separate document. Not all franchises are created equal. Some franchises might have very little training provided, but that's never really the case. It's in the best interest of the franchisor to provide training.
- Open Line of Communication: Many franchises offer dedicated field representatives to handle requests, complaints, or other needs of the franchisor. It's important as a franchise owner that you can express concerns or ask questions. You can expect your requests and questions answered by a representative of the franchise promptly.
- Availability of Exclusive Products: Some franchisors require the franchisee to purchase some products directly from the franchise. If this is the case, you can expect those products to be available when needed and delivered in a timely fashion.
- Recognition of Franchisee as a Business Owner: Owning a franchise means you are a business owner. There will be some stipulations about how you can present the franchise. This is necessary to protect the brand. The franchisor should exercise reasonable boundaries and allow reasonable freedoms to allow the franchisee to operate as the owner of their business.
- Marketing Efforts: The franchise agreement will most likely outline the franchisor's marketing responsibilities and the franchisees'. Most franchisors invest in national advertising campaigns with the franchisee required to pay a percentage to those marketing efforts. The franchisee can typically invest in specific local campaigns for their franchise. The franchisor may or may not support these efforts financially. Marketing is a crucial part of running a successful franchise, so it is essential to know where the marketing will come from when you buy a franchise. If it isn't explicitly outlined in the franchise agreement, ask about it.
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