How to benefit the most from
Franchise Consulting

What would you expect from franchise consulting - especially if you were to pay for the service?

Information? Advice? Impartiality?

Can consulting guarantee a profitable business?

It can get close - by supplying you with virtually all the aspects you should consider before investing your money in a franchise.



table in boardroom



Explore the extensive franchise information on this site (totally free of charge) first. You will then be best equipped to know what to expect - and demand - from franchise consulting.

On this page we will take a detailed look at the following topics:

Table of Contents

1. Disclosure Documents

2. Obligations of the Franchisor

3. Obligations of the Franchisee

The following links will then open pages in new windows with tons of additional information to consider during the franchise consulting process.

Advantage-Disadvantage of a Franchise

Small Business Franchise - What to look out for

Buying a Franchise - The Territory and Location

Calculating Franchise Royalties

Financing a Franchise

How to Franchise your Business

Finding the Most Profitable Franchise

Termination of a Franchise and Restraint of Trade





1. Disclosure Documents

magnifying glass on document

By law the franchiser has to supply the prospective franchisee with a full disclosure document or UFOC - Uniform Franchise Offering Circular.

If your franchise consulting firm does not offer this service, my urgent advice is to have a lawyer and or accountant review the disclosure documents - you are about to make a substantial investment!

The disclosure documents should list the following:

  • The directors and full history of the franchise as well as a full description of the business.
  • Any lawsuits affecting the directors and other officers relating to the franchise.
  • A list of the current franchisees as well as any failures, terminations or any other negative information pertaining to the franchise.
  • Obligations of the franchiser and the franchisee.
  • Full disclosure of all costs and fees payable.
  • Three years audited statements for the franchise company.
  • Do they belong to the franchise regulatory body as paid up members.

For further information about American franchise law, you can visit the
Federal Trade Commission and do a search for franchising on their site.

Franchise Associations in other countries:

Europe

South Africa

Australia

New Zealand

Furthermore, the franchise agreement document must be supplied to the franchisee at least five days (may vary in different states / countries) prior to the signing thereof to allow the franchisee time to study it and seek advice.

After the signing of the franchise agreement the entire agreement can be terminated by either party in writing within the prescribed seven days cooling off period (may vary in different states / countries).

Back to Table of Contents





2. Obligations of the Franchisor

The franchise consulting firm's duty is to scrutinize the franchise agreement to see what the franchiser considers his obligations to be. It should address the following:

  • The franchisor will never guarantee the success or profitability of the small business franchise. However, it is the duty of the franchisor to screen prospective franchisees! He owes it to the brand and existing franchisees to determine the potential and suitability of the applicant.

    * Do they have the correct approach to the business?
    * Do they have the basic skills which can be further enhanced by training to make a success of the business?
    * Will they contribute to the brand or will they become a liability?
    * Do they have adequate financing in place to see the business through its initial growth period or are they marginal, operating with largely borrowed money and do they have a good credit history?

    Some franchisors will happily accept the upfront franchise free from anybody, only to see the business fail later and their excuse is that no business model has a 100% success rate.
  • training session

  • It is the duty of the franchisor to provide suitable training and ongoing support. The franchisor can also be expected to stay informed on all matters pertaining to the franchise such as change in legislation, improvements in techniques, offers of competitors etc. where after it is his duty to inform the franchisee.
  • The franchisor must supply written manuals such as management guides, training and software manuals and must keep them updated.
  • The franchisor must endeavor to advance the growth of the small business franchise on behalf of the franchisee.
  • The franchisor must administer the marketing fund in an efficient manner (with separate accounting to that of the other accounts of the franchiser), notify the franchisees of promotions and advertising and utilize the marketing fund to the best benefit of the franchisee.

Note: you can not please all of the people all of the time and individual franchisees inevitably may feel that they do not benefit as much as others from a specific campaign - this is one area where a franchisee forum can assist in the ad spend decision making.

Back to Table of Contents



3. Obligations of the Franchisee

See if there are any clauses in the franchise agreement that you feel may be unreasonable such as compulsory centralized buying or frequent upgrading of shop fitting and discuss it with the franchise consulting firm or your lawyer.

The following though are standard obligations of the franchisee:

  • To pay the franchisee fee, royalty fee and advertising contribution and all other mutually agreed fees when they are due.
  • To keep confidential the business of the franchise such as finances, intellectual property, techniques and promotions and marketing campaigns.
  • Not jeopardize the goodwill of the franchise.
  • Maintain a good credit record with all suppliers.
  • meeting room

  • Comply with the standards as set out by the franchiser in the running of the small business franchise.
  • Have proper insurance in place and maintained as per the franchise agreement.
  • Comply with all laws pertaining to the business.
  • Comply with the accounting standards as set out by the franchisor.
  • Attend meetings, seminars and conferences as set out by the franchisor.

Back to Table of Contents

A competent franchise consulting firm can greatly assist potential franchisors and franchisees in establishing a franchise relationship that can endure over a long period of time.





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