Resources for Franchisors - Part 2
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 I make sure to run down the resources available when they are looking for assistance with the task. It is surprising to me how little is known about some of these services and information sources.
Creating the FDD. As often as I tell new franchisors that the Franchise Disclosure Document (FDD) is comprised of the answers to hundreds of questions posed in the Amended FTC Rule, clients are too happy to leave it to the lawyers, rather than dig into it themselves. When I start pressing for the tricky information required by Item 8, I pull up the requirements themselves and walk through it with the business people. This is not something that can just be left to the lawyers. Every new franchisor should have the Amended FTC Rule at its fingertips. The best place for that: the FTC’s website.
The FTC Website (www.ftc.gov) is helpful at several levels. For a copy of the Amended FTC Rule go into Consumer Protection/Business Information/Business Center/Selected industries/Franchise and Business Opportunities (https://business.ftc.gov/selected-industries/franchises-and-business-opportunities). There is also useful information for testimonials used in advertising, and guidelines for advertising on the Internet. Of course, you will also find summaries regarding the enforcement actions brought by the FTC, and published pieces designed for prospective franchisees that may be useful for the new franchisor.
Coming Up the Education Curve. Every new franchisor needs to get education on the rules of the franchise road, conventional wisdom, business experience, and franchising folklore. The International Franchise Association’s publications and programs are invaluable for this. Contact the IFA at www.franchise.org.
SBA Registry. The Small Business Administration has been trying for years to assist new franchisees finance their businesses, and it has been quite successful at streamlining the application process for an SBA-backed loan. It created the “SBA Registry” by which franchisors could pre-file their FDDs, meet some basic criteria, and file some basic information for approval and listing by the registry. Then, banks would not have to go through an aggravating loan-by-loan process of reviewing franchisee applicants for an SBA-backed loan. They could simply consult the registry to make sure the franchise system was currently listed. Given the current unprecedented credit crunch and new government credit programs coming online, franchisors should take another look at joining the SBA Registry if they’re not already on it. Contact: https://www.franchiseregistry.com.
We will cover other resources with future posts.
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.
