Resources for Franchisors - Part 1
The world of franchising can seem impenetrable at times, especially for companies new to the field. I work with a lot of companies developing new franchise programs, and make sure to run down the resources available when they are looking for assistance in the task. It is surprising to me how little is known about some of these services and information sources.
Operations Manuals. Companies routinely ask me about getting samples of other companies’ Operations Manuals so they can get help fashioning their own. The bad news: Manuals are simply not available. They’re highly confidential, of course, and samples, legal copies, or templates are non-existent. The best answer, or at least a start, is to look into any Franchisor Disclosure Document (FDD), where franchisors are required to include a copy of the Table of Contents of their Operations Manual. It’s usually nothing more than an outline, but a most useful start.
Competitor FDDs. Where can new franchisors easily and promptly find copies of their competitors’ FDDs? I recommend four approaches: three are free, and one carries a price.
(1) You can walk into the offices of one of the state franchise regulating agencies and ask about how you can review a registered document. Registered FDDs are considered publicly available documents, and most states will let you make copies – but you usually have to be there in person.
(2) Go online to CAL-EASI (“California Electronic Access to Securities Information”: https://www.corp.ca.gov/CalEASI/caleasi.asp). This is perhaps the most useful online tool available to franchisors, yet is not well known, maybe because it was created for securities information and is limited to California. California is the only franchise registration state in the country that posts its registered FDDs online for the world to inspect. The site posts not just FDDs, but it includes the full correspondence between the franchisor and the state, including critical comments on the FDD contents and any requirements or documentary revisions that were imposed by the regulators. Great stuff!
(3) Pose as a prospective franchisee. Under the federal rules, a franchisor is required to deliver an FDD upon “reasonable request,” which doesn’t mean on any request. A reasonable request means after the prospect has been in serious discussions with the franchisor or has cleared an initial level of the approval process. So, it takes a while, and probably too much cloak and dagger to make this approach feasible.
(4) Call a good franchise document service. I recommend FranData (https://www.frandata.com). They can locate any publically available franchise documents, but of course they charge for the service.
More resources in my next post!
Andrew Caffey is one of the nation’s leading franchise legal specialists and he represents franchisors across the United States. Caffey served as General Counsel of the International Franchise Association, a member of the Governing Committee of the ABA Forum on Franchising, and Chair of the ABA Forum on Franchising. He also is a member of the bar in Maryland and the District of Columbia, and a member of the Panel of Neutrals of the American Arbitration Association. Caffey has appeared on numerous franchise programs and is a frequent speaker and author on subjects of franchise and business opportunity regulation.
