franchising aspects Nov, 17 2009

A blueprint reveals it all

The first step towards the franchise route is to prepare a franchise plan that gives complete information about your company and its franchise system. Read on to know more about it.

By Ramanjit Kaur
Feature Writer
A blueprint reveals it all

A business script that carries all the information about the franchise system is advisable to be given to aspiring franchisees prior to the signing of the franchise agreement. It provides the prospective franchisees a history of the franchising company and the franchise operations. It is of great use for the franchisees as it helps them in careful analysis of the franchising business. Importantly, it must be provided to the franchisees at least 10-15 days prior to signing the franchise agreement. Let us study the components of this plan.

What is incorporated in it?

Despite the industry, size of the business, or any other factor, the franchise information document follows a simple format and contains similar information with specific business statistics. It includes:

  • History of the franchising company: The initial sections of the document must provide an overview of the franchising company. It should contain the information of the company’s history (i.e. from how long it has been into franchising, supports how many franchisees, facing any lawsuit). Additionally, you must give the information of any bankruptcy (i.e. information of the franchisee, who has failed, if any).
  • Listing the initial costs to start a franchise: As a franchisor, you must mention the franchise fee, royalties, marketing funds and other expenses in your franchise document. It helps the prospective entrepreneurs to decide accordingly whether to take up the franchise business or not.
  • Legal obligations of both the parties: It is beneficial for the franchisor to make it clear in advance the legal obligations to his franchisees. For instance, as a franchisor, it is obligatory for you to provide your franchisees with the necessary assistance, supervision and training. While on the other hand, it is the responsibility of the franchisees to participate in the actual operations of the franchise business, purchase or lease the land from the designated source or in accordance with the specifications.  
  • Statistics of the franchised business: There are certain financial aspects that you can include in the franchise information document. You can mention the annual profits of your company by providing the audited financial reports. However, it is not necessary to give concrete figures of the return on investment as it opens the company to legal accountability if a franchisee fails to live up to the written expectations. You have to be cautious while giving financial statistics of your franchising company.

Apart from these, the document must contain information about your current and previous franchisees, for how long they have been with the company, why they have terminated the franchise agreement (if any). This kind of information helps a franchisor in building a good image of himself and raises his merits.

Legal information to be considered

Being a franchisor, you must draft a franchise document (along with a separate franchise agreement) that contains legal information of your franchising business. Therefore, you have to keep in mind certain legal aspects while incorporating the information about exclusive franchise territory (if granted to the franchisees) and under what conditions the franchise agreement gets terminated. You have to specify these legal facets of your franchising business to make it run smoothly and profitably.

It is advisable to take help of a good attorney who has specialisation in franchising. He will guide you and enable you to come up with a comprehensive document carrying the precise information of your franchising company. The document plays a key role in expanding the business through worthy entrepreneurs.

Related: Think Before You Leap into Franchising Business

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