Intro to Franchising IG - International Franchise Association

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By law, a franchisor cannot offer a franchise until the franchisor has presented the prospective franchisee with a Disclosure Document. In fact, 14 states require franchisors to register their UFOCs with the state or to notify them that they will offer franchises before they begin to conduct any franchising activity in the state. The UFOC includes information about: ✔ the franchisor ✔ the company’s key staff ✔ management’s experience in franchise management ✔ franchisor’s bankruptcy and litigation history ✔ initial and ongoing fees involved in opening and running the franchise ✔ required investment and purchases ✔ territory rights ✔ responsibilities of the franchisor and franchisee ✔ other franchisees in the system with contact information Receipt of the UFOC is governed by the “ten-day rule.” This is a cooling-off period in which franchisors must give prospective franchisees 10 business days to think about their decision before they are allowed to sign the franchise agreement. The Franchise Agreement The franchise agreement is more specific than the UFOC about the terms of the relationship between the franchisor and franchisee. A typical franchise agreement may include specifics about: ✔ the franchise system, such as use of trademarks and products ✔ territory ✔ rights and obligations of the parties: standards, procedures, training, assistance, advertising, etc. ✔ term (duration) of the franchise ✔ payments made by the franchisee to the franchisor ✔ termination and/or the right to transfer the franchise The franchise agreement is the legal, written document that governs the relationship and specifies the terms of the franchise purchase. Like the UFOC, the franchise agreement also enjoys a “cooling off” period. Prospective franchisees are legally entitled to have the final franchise agreement for at least 5 business days before they are allowed to sign. This gives them time to review and consider the terms of the agreement. 8 An Introduction To Franchising Franchise Agreement THE IFA EDUCATIONAL FOUNDATION
UNIT 1: AN INTRODUCTION TO FRANCHISING WORKSHEET Activity 1: Walk or drive down your main street and list all the franchises you see. Can you find a commercial block without franchises? Activity 2: Get a copy of IFA’s Franchise Opportunities Guide: ✓ Scan the Table of Contents and count the number of Industry Categories in which there are franchise opportunities. ✓ In the “Franchising Information” section, locate and read the articles: • What Is Franchising? • Advantages and Challenges of Franchising ✓ Flip through the magazine to see how many franchises you recognize. Activity 3: Match the word on the left with its definition on the right: 1. franchising _____ A. the legal, written contract between the franchisor and franchisee 2. business format _____ B. the regular payment made by the franchisee to the franchisor, usually based on a percentage of the franchisee’s gross sales 3. franchise _____ C. a license that describes the relationship between the franchisor and franchisee including use of trademarks, fees, support, etc. 4. royalty _____ D. a type of franchise that includes a product or service and also the complete method to conduct the business 5. franchise agreement _____ E. a method of growing a business through expanded marketing and distribution THE IFA EDUCATIONAL FOUNDATION (Answers: A = 5, B = 4, C = 3, D = 2, E = 1) An Introduction To Franchising 9
Page 1 and 2: An Introduction to Franchising IFA
Page 3 and 4: An Introduction to Franchising IFA
Page 5 and 6: Chapter 1: An Introduction To Franc
Page 7 and 8: Restaurants KFC McDonald’s Pizza
Page 9 and 10: WHAT ARE THE ALTERNATIVES TO FRANCH
Page 11: Disadvantages: ✔ The franchisee i
Page 15 and 16: Chapter 2: Beginning Your Search Wh
Page 17 and 18: What Business Should You Start? “
Page 19 and 20: Determine If You Can Make Enough Mo
Page 21 and 22: ✔ Carefully study and obtain prof
Page 23 and 24: UNIT 2: BEGINNING YOUR SEARCH WORKS
Page 25 and 26: Chapter 3: Navigating the Paper Tra
Page 27 and 28: ✔ Item 2: Business experience. Th
Page 29 and 30: ✔ Be sure you know what services
Page 31 and 32: THE IFA EDUCATIONAL FOUNDATION SAMP
Page 33 and 34: SAMPLE INCOME STATEMENT ABC SLEEPWE
Page 35 and 36: UNIT 3: NAVIGATING THE PAPER TRAIL
Page 37 and 38: Chapter 4: Evaluating a Franchise--
Page 39 and 40: About training: ✔ What are the lo
Page 41 and 42: ✔ Are the manuals updated on a re
Page 43 and 44: Entrepreneurial self-assessment: St
Page 45 and 46: Do I Have What It Takes To Be A Fra
Page 47 and 48: ■ Does the franchisor staff atten
Page 49 and 50: ✔ Watch the details. ■ Success
Page 51 and 52: Chapter 5: Writing A Business Plan
Page 53 and 54: III. WHAT DOES A BUSINESS PLAN LOOK
Page 55 and 56: ✔ Summarize the entire Plan ✔ B
Page 57 and 58: 5. Establish a marketing budget. If
Page 59 and 60: REVIEW QUIZ Match term on left with

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