Is Buying a FDD Form to Franchise your Business a Big Mistake?
It is‚ but considering that I am a franchise lawyer‚ I certainly owe you a more detailed explanation about this issue.
First – WHY AM I WRITING THIS BLOG POST? Because I frequently get phone calls from “start-up” franchisors who run into litigation issues after selling a franchise using a generic “FDD form”. Even worse‚ I get calls from start-up franchisors who run into business issues” because the FDD they are using is completely inconsistent with the franchised business.
Second – AM I BIASED? No‚ especially since a quarter of our new franchise clients come to us to revise and reestablish their franchise system‚ i.e.‚ ditch the forms and develop a real franchise program.
Third – MY ADVICE? In the world of franchising there is tremendous opportunity. However there are many pitfalls and the stakes are way too high to take short-cuts. Franchising‚ is not about filling forms‚ but rather establishing a “franchise system”. A major part of this process is the development of the FDD and a process that forces both you and your franchise attorney to evaluate your business and what you want your franchise system to look like. Consider that many forms and franchise development companies fail to establish a consistent program and system that:
- Protects and carves-out alternative non-franchised distribution channels;
- Correctly establish and define protected territories and territory establishment criteria that work in the real world;
- Satisfy “multi-state” franchise requirements that start-up franchisor cannot afoford to overlook;
- Satisfy mandatory disclosure requirements related to identification of approved siuppliers and proprietary product
Finally – AS A LAWYER DO I REALLY UNDERSTAND YOUR GOALS AS A PROSPECTIVE FRANCHISOR? Yes‚ because I am also am a franchisor and I consult with and advise franchise management companies about expanding their businesses and franchise systems.
Look‚ if you are looking to franchise your business‚ be prepared to get what you put into it. Franchising is no easy task‚ but nothing worthwhile is easy.
By Charles Internicola November 28, 2012
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