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Starting a Franchise FAQ's

What individuals must be disclosed in FDD Item 2?

FDD Item 2 requires disclosure of the business experience of the franchisor's directors and principal officers.

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What Does it Mean to "Franchise Your Business"?

Well, you will be creating a legal and business framework for expansion.

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Does a Franchisor Need to Disclose in its FDD Negotiated Changes Made To a Franchise Agreement?

Yes - especially with regard to FDD Items 5 and 6.

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Are Franchisor's Required to Meet Capitalization Requirements As a Condition for State Registration?

Yes. Prior to granting registration, many state regulators evaluate a franchisors capitalization.

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What is FDD Item 21?

Franchise Disclosure Document Item 21 is the mandated FDD Item section that requires the disclosure of a franchisors financial statements.

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What Are Collective Action Clauses In Franchise Agreements?

Collective action clauses allow a franchisor to implement unanticipated marketing programs and fees.

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What is a Franchise Seller Disclosure Form and Who Must File One?

The franchise seller disclosure form is a form that franchisors must file with state regulator agencies.

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Is Franchising a Proven Business Model?

Yes. So much so that the successes of franchising are evident and obvious in almost every aspect of our daily lives.

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What is "Franchising"

At the most basic level, "franchising" is a business model and expansion tool designed to facilitate business growth and development.

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What is a Franchise Compliance Program?

Franchise compliance programs are business and legal procedures and systems typically designed by a franchise lawyer with the assistance and input of the franchisor.

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Should I Franchise My Business?

Franchising is a business and distribution model that permits a successful business owner and entrepreneur to achieve unit expansion (regionally or nationally) through the the utilization of franchisee capital and managerial effort.

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What constitutes an "offer to sell" a franchise?

Franchise regulation and a franchisors obligation to provide a prospective franchisee with a FDD is, typically, triggered by the offer of a franchise.

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What is FTC Rule 436?

FTC Rule 436 was established in 1979 by the Federal Trade Commission to regulate the franchise industry by requiring disclosure requirements to be set forth by franchisor prior to offering or selling a franchise.

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What do I need to do to apply for a fractional franchise exemption in New York?

First understand that if you are going to rely on a fractional franchise exemption, you need to proceed with caution and evaluate a number of factors related to your franchisees, the experience of your franchisees and their sources of revenue.

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What is a Franchise Fee under California law?

A franchise fee according to the California Franchise Investment Law 31011 is any fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business under a franchise agreement, including, but not limited to, any payment for goods and services.

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How long does it take for a franchise registration application to be processed in California?

According to the California Franchise Investment Law a franchise registration application should take until the 15th business day at 12 o'clock noon after filing the registration application, copy of FDD, payment, and all other supporting documents.

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How do I register a franchise in California?

To register a franchise in California the following documents are necessary and must be submitted to the California Department of Corporations along with a check to register the franchise in the amount $675 payable to "California Commissioner of Corporations".

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Can My Former Franchisor Shut Down My Business?

Yes - if you are operating a competitive business and your business was formerly operated as a franchised location.

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What Remedies are Available upon Termination or Nonrenewal of a Franchise in New York?

If you have invested in a franchise in New York, and at the time of renewal the franchisor refuses to renew the franchise agreement, there may be legal remedies available.

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What is the Uniform Franchise Offering Circular?

When starting a franchise, you will be required to provide potential franchisees with specific information about the franchise.

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What are the NY/NJ laws for bulk sales? Do I have to notify the state and if so, when?

In New York and New Jersey, the purchaser of a New York business must provide the state with a "pre-closing" notification of the proposed business sale.

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What is a "Trade Secret" in a Franchise Agreement?

When it comes to franchising, a trade secret is confidential information that relates to the operation of the franchised business.

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What is a "non-compete agreement" in a franchise agreement?

A non-compete agreement in a franchise agreement serves as an agreement between a franchisor and a franchisee advising the franchisee not to engage in competing activities for a certain time and geographic location.

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What are the Benefits of the International Trademark Registration Process?

Ever since the United States put the Madrid Protocol into effect in 2003, international trademark registration has become easier for US business owners.

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What is an FDD Item 19 Financial Performance Representation?

Item 19 of a franchisor's franchise disclosure document (FDD) refers and relates to the mandatory disclosure of financial performance representations made by the franchisor to prospective franchises.

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Can a Franchisor Disclose its FDD Electronically?

Yes. The federal franchise rule permits a franchisor to electronically disclose its FDD to a prospective franchisee.

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What is the FDD Waiting Period?

It is the period of time a franchisor must wait before accepting money or signing a contract with a new franchisee.

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What is a Franchise Disclosure Document?

A Franchise Disclosure Document ("FDD") is a required legal document that contains information and disclosures that a franchisor must provide to a prospective franchisee before selling a franchise.

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