I offer a competitive fee to draft your franchise documents, which includes the following services: consultations to discuss strategies for building the franchise system, and crafting an FDD compliant with not only FTC regulations and the NASAA standards, but further, in preparation for exacting reviews by state examiners in registration jurisdictions. My goal will be to prepare your FDD for issuance and commencement of sales in non-registration jurisdictions, and to prepare for review and approval by state examiners in registration jurisdictions.
The Franchise Model
The franchise model has proven to be a very effective method for conducting business. In short, it allows an entrepreneur to develop a business model, including trademarks, systems and support modes specific to a particular trade or industry, and then solicit franchisees to invest their capital in the business model and assume much of the market risks. In return, the franchisor collects royalties and fees. For the franchisee investing their assets in this venture, the franchise provides a brand name and in-place systems, thus allowing them a quicker entry into a given industry.
The Success of the Franchise Business Model
To put the success of this business model in perspective, consider that in 2023 there were approximately 790,000 franchises in North America, which generated $825 billion dollars in revenue. In 2023, the growth of franchise businesses is expected to be 3%, with a forecast of $8.7 billion dollars in revenue, together with an increase of 254,000 jobs (as reported by The International Franchise Association together with FranDate: See www.franchise.org/sites/default/files/2023-03/2023-Franchising-Economic-Report.pdf) Prior to the Great Recession, there were 770,835 franchises, generating $675 billion in revenue. Therefore, franchise businesses make up a very substantial portion of small businesses in the United States, and greatly impact the nation’s GDP.
Factors to Consider When Building a Franchise Business
A major factor to consider in building a franchise network is government oversight. The Federal Trade Commission is tasked with regulating the national franchise market. However, state governments also play an essential role in oversight of franchise activity. There are numerous states in which a Franchise Disclosure Document (or Circular) must first be filed, or reviewed and approved by that state’s securities officials before franchise sales may take place in the jurisdiction. Failure to comply with registration state requirements may result in severe monetary penalties and perhaps injunctions to halt the franchisor’s activities. Moreover, other states have business practice laws which may also impact franchise relationships.
Therefore, it is essential at the formation stage of your franchise company to become educated about the federal regulatory environment, as well as state-specific requirements, to assure that your model and practices comply with the jurisdictions in which you seek to sell franchise marketing rights.
Consider Kilcommons Law’s assistance in building and expanding your franchise system.
This article is not intended to be relied upon as advice for your particular circumstances. Therefore, consult with a qualified FRANCHISE ATTORNEY before offering or signing a franchise agreement.
© Kilcommons Law, P.C. 2023