Signature FranchisingFranchise FAQ

The Signature Franchise Program includes the legal documents, a set of operations manuals, and marketing & advertising materials, all prepared by Frandocs Franchise Professionals.

How does it work?

Each Client is assigned a Franchise Consultant, who is familiar with every nuance of franchising and will guide you through your franchise process. Designated teams of Signature Franchise Professionals will create each of the items included in your program used to franchise your business, while working closely with you to create a dynamic Franchise Program that can deliver results.

Should I use Signature Franchising to help me Franchise my Business?

Yes, if you wish to save time, money and aggravation! Signature Franchising has the experience to customize a Franchise Systems to meet your needs. Signature Franchising will provide the facts and information you will need to successfully franchise your business. We will take on the role of your Franchise coordinator and coordinate all of the parts necessary to develop a complete franchise package and operations manuals for your future franchisees. A Signature Franchising representative will work with you face to face during the Franchising process.

Is Franchising my Business Risky ?

Everything you do involves some type of risk. Signature Franchising helps you to eliminate any undo business risk that you might encounter in Franchising. Franchising is about communicating your successful operations to your new franchisee applicants and selling franchises. If you are willing to take the time to coordinate with our experienced Franchise Consultants in the franchise development and franchise sales process, then you too can become a successful Franchisor.

Your task is to provide the information to Signature Franchising enabling us to offer the support necessary to develop you Franchise Sales and Operations Systems. Your Franchisees become your best customers and their success is ultimately your success.

In order to minimize potential risk, the Federal Trade Commission (FTC) regulates the franchise industry. In addition to the Federal regulation, some states require a State Registration and/or Approval, some states simply require filing. You, as a Franchisor are required to issue the Franchise Disclosure Document (FDD) to prospective franchisees, a document outlining both your responsibilities and the Franchisee’s responsibilities. Franchising is regulated by the FTC to protect both sides of the agreement, you against unscrupulous franchisees’ and franchisees against being duped by unscrupulous Franchisors.

Should I Franchise or License my business?

This depends on your business and the structuring of your expansion. The biggest advantage you will have by being a franchise is the control of your clients (franchisees) and the constant growth of your company. If you wish to expand your business, be paid a royalty fee every week and have your products recognized as a brand then franchising is the best way to go.

What are my advantages by Franchising my business ?

Franchising your business is the best possible vehicle you can use for the expansion of your Brand. By requiring the franchisee to make a commitment with both an initial franchise fee and training they will have made an investment and their principal interest is to make that investment grow and be successful. Franchising, when done correctly, has produced more successful business than any other method of private enterprise. The experience gained by both the franchisor and the franchisee working together to build the brand built with a franchise is priceless.

How does the economy relate to Franchising?

Franchising is not counter cyclical to the economy. Franchising, like any other business is not as healthy in a recession as it is in a boom period. The Franchising Industry has experienced, that when people lose their jobs and/or their security is threatened, they turn to buying a business, or going into a business they have created, or one that has been franchised. This mentality will produce more potential franchisees for you, but their struggle to succeed with your Franchise could be harder in down times, depending on the type of industry involved. Franchising is a ‘safer haven’ then starting up their own business and is an attractive alternative to job seeking, or a new ‘from the ground up’ business startups. Franchise concepts that meet the requirements of the economy are usually successful in all types of upswings and downturns in the economy. This is reflected in low investment, high return franchises.

As a Franchisor, do I need to show financial stability?

Of course you do, but being a franchisor you will not disclose any financial information of your existing business operations, only those of your new Franchising Company. It is important that your new corporation should disclose the financial strength to provide the services that you have promised your franchisees, such as:

Am I ready to Franchise my business ?

Becoming a Franchisor requires a complete change in your business attitude. Instead of concentrating on selling your products/services to the public, you will spend the majority of your time assisting your Franchisees in selling those same products/services to the public. A strong desire to teach and relate to others what you have learned in the business, entering into a corporate style leadership role and becoming more of an expansionist than an operator by selling your franchise to individuals looking for new opportunities, are all responsibilities that you must be willing to develop and master.

A Signature Franchising representative will be there to assist you as you transition into a Franchisor.

How will Signature Franchising help franchise my business?

We will schedule a series of Interviews, obtaining information about your structure and business model. Here is a sample of what you should expect:

What is a Franchisor?

The Description of a “Franchisor” and a “Franchise” as described by the FTC

A BUSINESSES COVERED BY FEDERAL TRADE COMMISSION FRANCHISE RULE

1. Two types of continuing commercial relationships are defined as a "franchise" and, thus, are covered by the FTC Franchise Rule.

a. Franchise (business format or product format) - three (3) elements:

The franchisee sells goods or services which meet the franchisor's quality standards and operates under the franchisor's marks or which are identified by the franchisor's mark;

The franchisor exercises significant control over, or gives the franchisee significant assistance in, the franchisee's method of operation; and

The franchisee is required to make a payment of $500 or more to the franchisor or a person affiliated with the franchisor at any time before or within six months after the business opens (excluding the wholesale price of inventory).

b. Significant Control or Assistance. The FTC Franchise Rule Interpretive Guides sets forth nine examples of significant types of controls and five examples of significant promises of assistance over the franchisee's entire method of operation.

Significant Types of Control:

Site approval for unestablished business;

Site design or appearance requirements;

Hours of operation;

Production techniques;

Accounting practices;

Promotional campaigns requiring the franchisee's participation or financial contribution;

Restrictions on customers; or

Location or sales area restriction;

Personnel policies and practices;

Significant Types of Promises of Assistance to the Franchisee's Method of Operation:

Formal sales, repair or business training programs;

Establishing accounting systems;

Furnishing management, marketing or personnel advice;

Selecting site locations; or

Furnishing a detailed operating manual.

In addition to the above listed elements - the presence of any of which would suggest the existence of "significant control or assistance" the following additional elements will, to a lesser extent, be considered when determining whether "significant" control or assistance is present in a relationship:

A requirement that a franchisee service or repair a product (except warranty work);

Inventory controls;

Required displays of goods; or

On-the-job assistance in sales or repairs.

Furnishing a detailed operating manual.

The following elements are not considered in determining whether "significant" control or assistance exists:

Trademark controls designed solely to protect the trademark owner's legal ownership rights in the mark under Federal and state trademark laws (such as display of the mark or right of inspection);

Health or safety restrictions required by Federal or state laws or regulations;

Agreements between a retailer and a trading stamp company providing for the distribution of trading stamps in connection with retail sales of merchandise or service

Agreements between a bank credit interchange organization and retailers or member banks for the provision of credit cards and credit services; and

Assisting distributors in obtaining financing to be able to transact business.

c. Business Opportunity - three (3) elements:

The franchisee sells goods or services which are supplied by the franchisor or a person affiliated with the franchisor;

The franchisor assists the franchisee in any way with respect to securing accounts for the franchisee, or securing locations or sites for vending machines or rack displays, or providing the services of a person able to do either; and

The franchisee is required to make a payment of $500 or more to the franchisor or a person affiliated with the franchisor at any time before, or within six months after, the business opens.

d. Relationships covered by the FTC Franchise Rule include those which are within either definition of "franchise" and those which are represented as being within the definition when the relationship is entered into, regardless of whether, in fact, they are within the definition.

B. EXEMPTIONS AND EXCLUSIONS FROM THE FTC FRANCHISE RULE

1. Exempt Relationships. fractional franchises; leased department arrangements; and purely verbal arrangements.

2. Excluded Relationships. employer/employee; general business partners (not a limited partnership); membership in retailer-owned cooperatives; certification and testing services; and single trademark licenses.

C. DEFINITION OF "FRANCHISE" UNDER STATE LAWS.

1. It is possible to structure yourself to not be a "franchise" under the FTC Franchise Rule but you still may be a "franchise" under certain state laws because of a broader definition of "franchise" under state law.

a. The 15 state franchise disclosure laws define "franchise" in terms of a combination of three or four of six elements:

the franchise agreement itself (oral or written);

the right to sell the franchisor's goods or services;

a community of interest between the franchisor and the franchisee;

a marketing plan or system prescribed or suggested by the franchisor;

the franchisor's substantial participation in the franchisee's business;

the franchisee's substantial association with the franchisor's trademark; or

the franchise fee (some states - no minimum or less than $500).

b. California, Illinois, Indiana, Maryland, North Dakota, Oregon, Rhode Island, Virginia, Washington and Wisconsin define a franchise as a combination in which the franchisee: operates under a marketing plan or system prescribed in substantial part by the franchisor; is substantially associated with the franchisor's trademark or other commercial symbol designating the franchisor; and pays, directly or indirectly, a franchise fee.

c. Hawaii, Minnesota and South Dakota define a franchise relationship in which the franchisee: has a community of interest with the franchisor; has the right to use the franchisor's trademark or other commercial symbol; and pays, directly or indirectly, a franchise fee

d. Michigan and New York each require: a marketing plan or system or substantial association with the franchisor's trademark; and payment of a franchise fee.

2. Therefore, in structuring a business relationship to fall outside the definition of a "franchise," the FTC Franchise Rule must be reviewed as well as the laws of the state in which you intend to do business and the state of residence of the other person (franchisee).

D. THE ACCIDENTAL FRANCHISOR

Many types of business relationships may inadvertently become franchises because the elements of a franchise are present, notwithstanding the intention of the parties or the label of the relationship.

1. Distributorships/Dealerships.

a. Definition. A distributorship/dealership is a marketing format whereby independent business persons take on certain wholesale ("distributor") and retail ("dealer") marketing, advertising, inventory, selling and/or servicing functions of a manufacturer to better promote and sell such manufacturer's products. A distributorship is generally characterized as a business relationship in which a distributor has the right to distribute products of a manufacturer or manufacturers. The distributor may carry a single line or multiple lines of one or more manufacturers who may be in competition with one another. A dealer is similar to a distributorship. The difference is that a dealership often obtains its products from a distributor rather than a manufacturer, and resells to the public from a retail outlet rather than to other dealers from a wholesale outlet. These descriptions are somewhat simplified; in practice, elements of distributorships and dealerships may be combined in a business relationship. Further, these labels are often used interchangeably.

b. Pitfalls. To avoid being a franchise several things may be considered such as: No fee for the right to sell the supplied product; No significant assistance and/or control; and Dealer cannot use trademark

2. Trademark Licenses.

a. Definition. A license is the right of a person ("licensee") to use, for the payment of a fee and/or royalty, a patent, trademark, trade name, service mark or copyright owned by another ("licensor") in connection with the manufacture and/or sale of a product or rendition of a service.

b. Pitfalls. Two of the elements of a franchise (use of a trade name and payment of a fee) are usually present. However, the licensor usually does not provide a marketing system or plan in connection with the product or service for which the trademark is licensed. There is a "twilight zone" between a licensor "policing" its trademark and providing significant assistance and/or control of the licensee.

3. Partnerships and Joint Ventures.

a. Definition. A partnership is an association of two or more persons to carry on a business for profit as co-owners. A joint venture is a partnership organized to carry out a limited or specific purpose. Sometimes there are two companies involved at the same or at different levels of the value chain (e.g., capital/labor; manufacturer/retailer) whereby there may exist certain synergies in working together either as a joint venture or as a partnership.

b. Pitfalls. While a joint venture or a general partnership is excluded from the definition of a franchise under the FTC Franchise Rule, where a company (franchisor) develops a partnership (holding its partnership interest in a subsidiary or affiliated corporation) for each outlet of distribution, contributes a license of its trade name and marketing plan and receives any fee (e.g., training) the relationship may be considered a franchise.

4. Employer/Employee.

Where the employer requires the employee to "invest" in the outlet of distribution in which the employee will manage and share in its profits, the arrangement may be considered a franchise.

5. Corporation.

The use of forming a corporation for each outlet of distribution owned jointly by the person contributing a license of its name and market plan and a person contributing money and his or her labor will not fall within the general partnership exemption and may be considered a franchise.

6. Sale of Business.

Generally, the sale of business including the name of the business is not a sale of a franchise. If the seller retains ownership of the name and merely licenses or permits the buyer to use the name and offers the buyer a marketing plan or significant assistance or control after the sale, the sale may be considered a sale of a franchise.

7. Sales Representative.

a. Definition. A sales representative is a person acting as an independent contractor to sell goods or services on behalf of a manufacturer or distributor. Usually, the sales representative pays no fee to become a representative, does not take title to the goods and does not operate under the manufacturer's or distributor's trade name.

b. Pitfalls. If the sales representative sells or distributes products under a marketing plan prescribed by the manufacturer, uses the manufacturer's trade name and paid the manufacturer a fee for the right to engage in business, the relationship may be considered a "franchise."

Registration States - Franchise Registration, Non-Registration and Filing States

The FTC’s Description of State Offices Administering State Disclosure Laws

Fifteen states have franchise investment laws that require franchisors to provide pre-sale disclosures, known as "offering circulars," to potential purchasers. Thirteen of these state laws treat the sale of a franchise like the sale of a security. They typically prohibit the offer or sale of a franchise within their state until a franchise offering circular has been filed on the public record with, and registered by, a designated state agency. Two of the fifteen states do not require a filing of offering circulars, as noted in the list of state offices below.

These state laws give franchise purchasers important legal rights, including the right to bring private lawsuits for violation of the state disclosure requirements. We encourage potential franchise purchasers who reside in these states to contact their state franchise law administrators for additional information about the protection these laws provide.

Franchise Registration States

Why should I Franchise my business?

If you have identified a new way to provide a service or you have a unique product offering, franchising could be for you. Some of the most common reasons to franchise are:

Franchising requires less capital than other growth methods .

By Franchising Your Business you will achieve:

Rapid Expansion of the Business

Market Dominance

Franchising ensures that qualified managers are operating additional units

Franchise units tend to operate better and more profitably than company owned units

Greater Buying Power

Increased Name Recognition

Increased Advertising and Marketing Budget

Receipt of Initial Franchise Fees

Payment of Franchise Royalties

Sales of Proprietary Products to your Franchisees

Selling of Supplies to your Franchisees

Then Franchising is your method of growth and distribution. Signature Franchising will identify if franchising is the best vehicle for you.

What makes your Signature Franchising different ?

Experience. We have over 30 years of developing and selling Franchises throughout the USA and many other countries. We suggest that you speak to our references.

Why Franchise, rather than open up more locations?

The answer is simple. Rather than use your money opening locations you will let the Franchisee invest their money, time and knowledge to build your business. As a single business owner, you can do only so much, limited by capital and time. Your franchisees will multiply and increase your business income and profits much quicker, with less stress than you alone can do it.

What are the main hurdles of Franchising?

Management is the key to successful business and Franchising is a business model that requires the ultimate in acumen and experience. If you are willing to dedicate your time and knowledge to the Franchising of your Business, then there are no hurdles that can’t be overcome.

Which businesses are best to Franchise?

It might be easier to define what types of businesses might not be a good franchise model.

* If your business does not require a large investment to open satellite units and there are no obligations to employees in remote areas of the country, then you don’t need to Franchise.

However, you if do find that by having Franchisees invest their money, time and assume the liability for growth, you will profit more rapidly, then you should Franchise.

How soon can I begin to sell Franchises ?

Once Signature Franchising has structured your Franchise business model and you have grasped the steps necessary to franchise your business, your attorney has reviewed your documents, and State Registrations or filings completed if necessary, the sales process begins.