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HOW TO FRANCHISE A BUSINESS – TIPS FROM AN MBA FRANCHISE ATTORNEY AND FORMER FRANCHISE OWNER

HOW TO FRANCHISE A BUSINESS – TIPS FROM AN MBA FRANCHISE ATTORNEY AND FORMER FRANCHISE OWNER

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Published by smithallen034
WHY COMPANIES FRANCHISE A BUSINESS MODEL
Imagine opening 100 new business locations without having to foot any bills for real estate, equipment and build out costs or taking on any risk. Even more, imagine managers running all those locations, which are just as committed to growing the company as you - and not having to pay them a dime.
WHY COMPANIES FRANCHISE A BUSINESS MODEL
Imagine opening 100 new business locations without having to foot any bills for real estate, equipment and build out costs or taking on any risk. Even more, imagine managers running all those locations, which are just as committed to growing the company as you - and not having to pay them a dime.

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Published by: smithallen034 on Nov 16, 2010
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05/12/2014

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Franchise Foundations
-
4157 23rd Street, San Francisco, California 94114Ph: 800.942.4402
Page 1
HOW TO FRANCHISE A BUSINESS ± TIPS FROM  AN MBA FRANCHISE ATTORNEY AND FORMER FRANCHISE OWNER 
Copyright 2010, Kevin B. Murphy, B.S., M.B.A., J.D. - all rights reserved
WHY COMPANIES FRANCHISE A BUSINESS MODEL
Im
agine opening 100 new business locations without having to foot any bills for realestate, equip
m
ent and build out costs or taking on any risk. Even
m
ore, i
m
agine
m
anagers running all those locations, which are just as co
mm
itted to growing theco
m
pany as you - and not having to pay the
m
a di
m
e.
I
n fact they pay
you
 
m
oney for theright to operate your business
m
odel.For
m
any co
m
panies, creating a franchise progra
m
is a sensible way to achieve rapid,profitable growth without giving up any control or ownership. Going fro
m
a singlelocation to a dozens or even hundreds is possible and well-docu
m
ented becausefranchise owner-investors put up all invest
m
ent capital, shoulder all risk and assu
m
e allday-to-day operating responsibilities.
It's expansion, using OPM
- Other People's Money.
ENTERING A NEW BUSINESS 
 
T
he bad news is a co
m
pany planning to franchise
m
ust realize it is entering a newbusiness, offering an entirely different service (training & support) to entirely newcusto
m
ers (business owner-operators).
T
his new business requires different skills,abilities and expertise.
I
n the new business of franchising, it is critical to developeffective evaluation, docu
m
entation,
m
entoring, training and consulting skills.
 
THE FRANCHISE FEASIBILITY ANALYSIS PHASE 
An indispensable step before any franchise a business develop
m
ent progra
m
getsunderway is an analysis of the concept and business
m
odel. Has the concept beensufficiently proven in the
m
arketplace? How profitable are existing prototypes orco
m
pany-owned outlets? Franchising will not solve existing proble
m
s, it will onlyintensify the
m
. Franchising is not a way to raise capital, get rich quickly or expand abusiness with existing proble
m
s.
T
here
m
ust be sufficient profitability in the business
m
odel so that royalty and other pay
m
ents can be
m
ade and leave the franchise ownerwith a sufficient profit.
 
Franchise Foundations
-
4157 23rd Street, San Francisco, California 94114Ph: 800.942.4402
Page 2
THE FRANCHISE STRATEGIC PLANNING PHASE 
A successful franchise develop
m
ent progra
m
begins with a solid plan - a foundation forfranchising. Often there is little or no strategic planning with new co
m
panies enteringthe franchise industry.
T
his is because they utilize the services of a franchise consultingfir
m
or
ranchise attorney
, where little or no attention is paid to critical strategicplanning issues.
W
hat is called for is not a traditional business plan, a rather thick document that normally does nothing but collect dust in the dark drawer of someone's desk. More important than a business plan is a strategic plan - a vision of the franchise program together with a limited number of concrete, achievable actionsteps.
 
THE FRANCHISE DOCUMENTATION PHASE 
 
I
f your co
m
pany
m
ade doing a good job at the planning stage its nu
m
ber one priority,
ranchise documentation
goals will be apparent.
Proprietary assets
(like recipes,for
m
ulas,
m
ethods, branding, operating techniques and custo
m
er infor
m
ation)
need tobe identified and protected 
. A catchy and appropriate na
m
e, logo and tag lines areregistered as trade
m
arks or service
m
arks.A
 franchise operations manual and franchise training program are developed 
, oftenfro
m
scratch, to i
m
part business day-to-day operating skills to franchise owners as wellas ensure unifor
m
ity of products and services.
T
he franchise operations
m
anual andtraining progra
m
curriculu
m
 
m
ust be drafted or edited with a particular focus. Certaintopics, chapters and policies used in
m
anuals for co
m
pany-owned locations, forexa
m
ple, are entirely inappropriate in a franchise environ
m
ent, creating significantfranchise liability issues.Finally, and only after all of the above are underway, a
FDD Franchise DisclosureDocument
, si
m
ilar to a securities (stock offering) prospectus,
is prepared by acompetent 
 franchise attorney 
. Doing it correctly and with a balanced, fair perspectivecan save going to the courtroo
m
later. Using a boilerplate or online FDD te
m
plate willal
m
ost certainly guarantee a visit to the courtroo
m
down the road. Since these visitscost hundreds of thousands of dollars and up, they are not cheap and far outweigh thecost of doing it right to begin with.
Training the Franchise Management Team
When the docu
m
entation phase is over,
m
o
m
entu
m
gathers as the excitingi
m
ple
m
entation phase begins.
T
his is where the sparks begin to fly as franchises are

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