Buying A Franchise FAQs
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Buying A Franchise FAQs
Why should I purchase this particular franchise?
A franchise may need to be looked at from a product or service comparison prospective. While one franchise’s product or service may be suitable in a geographic area, another may not be. When evaluating a franchise, close attention needs to be spent evaluating: the strength of the franchiser, the franchiser’s long-term goal, the uniqueness of its product or service, the type of consumer response the product or service is achieving, the amount of fees it charges, the type of support it provides: 1) startup 2) operations 3) marketing, and the length of the contract you will be signing.
Does the franchise agreement contain a duty of good faith and fair dealing provision?
A duty of good faith and fair dealing provision allows the franchiser and the franchisee to work together in a good faith manner and puts into place a duty to act honestly with each other and observe standards in fair dealing. This provides a degree of protection from false statements and empty promises.
Does the franchise company offer an area of protection (AOP) in writing?
Exclusive Territory means that the franchiser and/or another franchisee will not compete for the same business within the same geographic area; a related issue is encroachment. Is the franchiser limited from placing or licensing another business in unreasonable proximity to an existing franchisee that is engaged in a similar franchise business?
What does it cost to get out of the Agreement?
Many franchise agreements require enormous liquidated damages exceeding several hundred thousand dollars if you try to exit the system before the term expires. Try to minimize your damages in the event you have to exit the system.
Can I sell my business and allow the franchise to be transferred?
There may come a time during your franchise that you would like to sell out to another party. Most agreements limit or outright prohibit a transfer of your franchise to another person or company. Request a provision allowing you to transfer your rights under the franchise agreement as long as the interested party is creditworthy and capable of taking over the business.
Does your franchise limit or restrict the franchisee from joining a Trade Franchisee Association?
Some franchise agreements restrict a franchisee from joining an Independent Trade Association formed by other franchisees like you. These associations are created for the purpose of protecting franchisees' interests and rights and allow franchisees to state a unified voice on concerns and issues.
Does the franchise company restrict you from competing after the franchisee/franchiser relationship ends?
Some franchise agreements restrict a franchise owner or his/her business from competing within the same industry upon leaving the system. A franchisee should not agree to any restrictions that are not directly related to the same place and type of business.
Does the franchiser provide accountability for the advertising marketing fund?
Franchisees within a system frequently pool their money for general advertising and marketing purposes or to handle bookkeeping functions. Some franchisers use these funds at their own discretion, even for purposes not associated with marketing & advertising, without providing a full disclosure of accounting to its franchisee. Requesting audited statements for these fund will disclose where your money is spent.
Does the franchise allow a cure period in the event of a default?
In some franchise systems, when a franchisee fails to comply with system standards the franchiser has the immediate right to terminate the franchisee and demand liquidated damages. However, some franchisers allows the franchisee to cure the default within a period of time (for instance, 30 days) so the franchisee can comply within the required standards. If the default is not cured within the allocated time, the franchisee then may be terminated.
Does the franchiser require me to sign a General Release upon the end of our relationship?
Whether it be a voluntary or default termination, many franchisers require a General Release Agreement to be signed by the franchisee when the relationship ends. While there may be nothing wrong with signing such an agreement, these agreements tend to be one-sided and in the favor of franchisers. They allow the franchiser to be released from any known or unknown obligations and liabilities, yet the franchisee may continue to be responsible for certain obligations and potential liabilities even after the relationship ends. Make sure the release is mutually applicable to both parties.
Buying A Franchise FAQs - To learn more about this author, visit Start Your Business's Website.
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Buying A Franchise FAQs
Why should I purchase this particular franchise?
A franchise may need to be looked at from a product or service comparison prospective. While one franchise’s product or service may be suitable in a geographic area, another may not be. When evaluating a franchise, close attention needs to be spent evaluating: the strength of the franchiser, the franchiser’s long-term goal, the uniqueness of its product or service, the type of consumer response the product or service is achieving, the amount of fees it charges, the type of support it provides: 1) startup 2) operations 3) marketing, and the length of the contract you will be signing.
Does the franchise agreement contain a duty of good faith and fair dealing provision?
A duty of good faith and fair dealing provision allows the franchiser and the franchisee to work together in a good faith manner and puts into place a duty to act honestly with each other and observe standards in fair dealing. This provides a degree of protection from false statements and empty promises.
Does the franchise company offer an area of protection (AOP) in writing?
Exclusive Territory means that the franchiser and/or another franchisee will not compete for the same business within the same geographic area; a related issue is encroachment. Is the franchiser limited from placing or licensing another business in unreasonable proximity to an existing franchisee that is engaged in a similar franchise business?
What does it cost to get out of the Agreement?
Many franchise agreements require enormous liquidated damages exceeding several hundred thousand dollars if you try to exit the system before the term expires. Try to minimize your damages in the event you have to exit the system.
Can I sell my business and allow the franchise to be transferred?
There may come a time during your franchise that you would like to sell out to another party. Most agreements limit or outright prohibit a transfer of your franchise to another person or company. Request a provision allowing you to transfer your rights under the franchise agreement as long as the interested party is creditworthy and capable of taking over the business.
Does your franchise limit or restrict the franchisee from joining a Trade Franchisee Association?
Some franchise agreements restrict a franchisee from joining an Independent Trade Association formed by other franchisees like you. These associations are created for the purpose of protecting franchisees' interests and rights and allow franchisees to state a unified voice on concerns and issues.
Does the franchise company restrict you from competing after the franchisee/franchiser relationship ends?
Some franchise agreements restrict a franchise owner or his/her business from competing within the same industry upon leaving the system. A franchisee should not agree to any restrictions that are not directly related to the same place and type of business.
Does the franchiser provide accountability for the advertising marketing fund?
Franchisees within a system frequently pool their money for general advertising and marketing purposes or to handle bookkeeping functions. Some franchisers use these funds at their own discretion, even for purposes not associated with marketing & advertising, without providing a full disclosure of accounting to its franchisee. Requesting audited statements for these fund will disclose where your money is spent.
Does the franchise allow a cure period in the event of a default?
In some franchise systems, when a franchisee fails to comply with system standards the franchiser has the immediate right to terminate the franchisee and demand liquidated damages. However, some franchisers allows the franchisee to cure the default within a period of time (for instance, 30 days) so the franchisee can comply within the required standards. If the default is not cured within the allocated time, the franchisee then may be terminated.
Does the franchiser require me to sign a General Release upon the end of our relationship?
Whether it be a voluntary or default termination, many franchisers require a General Release Agreement to be signed by the franchisee when the relationship ends. While there may be nothing wrong with signing such an agreement, these agreements tend to be one-sided and in the favor of franchisers. They allow the franchiser to be released from any known or unknown obligations and liabilities, yet the franchisee may continue to be responsible for certain obligations and potential liabilities even after the relationship ends. Make sure the release is mutually applicable to both parties.
Buying A Franchise FAQs - To learn more about this author, visit Start Your Business's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Staging DivaDebra Gould, aka The Staging Diva®, is President of Six Elements Inc., an internationally recognized home staging company. Inspired by many requests from aspiring home stagers wanting to start similar businesses, Gould created the Staging Diva Home Staging Business Training Program. Gould has trained over 1000 Staging Diva Graduates worldwide to start staging businesses. Buying decorating and selling six of her own homes in four years lead to an interest in real estate staging which she turned into a career with the launch of sixelements.com in 2002. Since then she has staged hundreds of homes in addition to teaching home staging training. Gould is the author of several home staging resources including a series of popular ebooks made up of a Design Guide, Color Guide and Portfolio Guide. For more information about Debra Gould visit stagingdiva.com. - Visit Staging Diva's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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