Understanding Franchising - Part 2

Understanding Franchising

Part 2

Presented by:Marvin L. Storm

Review: Types

• Extreme Entrepreneurs• Innovator Entrepreneurs• Founder Entrepreneurs• FranPrenuer

Review: What is• Licensing Concept vs. Buying

Review: Benefits• Brand• Valuation at exit• Learning curve reduced• Technology• Marketing• Support• Systems are a significant

competitive advantage

A Brief History of Franchising

Two Type of Franchise Business Models?

- Trademark Franchising

- Business Format Franchising

- History of Franchise Regulations The McDonald’s Story Fraud & Abuse in Franchising

UFOC in 1972-1978

FDD adopted in July 2009

Franchise Disclosure Documents

Franchise Disclosure Document Discussion

______

Understanding the Document, Its History and

How to Use It

Franchise Disclosure Documents

Our Discussion on the Franchise Disclosure Documents Will Be

Done in Four Discussion:________

1.Overview of the Disclosure Docs2.A Brief History of Franchising3.The Disclosure Section4.The Franchise Agreement

• What is the Franchise Disclosure Document?

Three Parts to the FDD

1) The Franchise Disclosure2) The Franchise Agreement3) The Exhibits

Guarantees, General Release, Confidentiality Agreement, Consent To Transfer, Financial Statements, State Addenda To the Disclosure Document, Operations Manual - Table Of Contents

Franchise Disclosure Documents

• What is the Franchise Disclosure Document?

• Why is the FDD required?

Franchise Disclosure Documents

• What is the Franchise Disclosure Document?

• Why is the FDD required?

Franchise Disclosure Documents

• Three Things to Understand about the FDD?

1) The intent of the FDD is to provide any and all information that the Federal Trade Commission and your State Regulators believe you need to know to make an informed business decision.

Franchise Disclosure Documents

Three Things to Understand about the FDD?

Franchise Disclosure Documents

Three Things to Understand about the FDD?

2) Use it to gain an understanding of the creditability of the franchisor management team, the financial terms for start up, ongoing fees and how the franchisor protects the brand.

Franchise Disclosure Documents

Three Things to Understand about the FDD?

3) Gain an understanding of the contractual obligations of both parties and how the franchise system works.

• Intent

• Team, financial terms, fees and brand protection

Review: Key Understandings About the FDD

• Obligations and how the system works

Questions???