Guiding the Start-Up Franchisor

Excitement and anxiety.

These contravening emotions are shared by virtually every franchisor considering or already determined to enter the franchise arena. Excitement at the prospect of tapping into the wealth generated by franchising. After all, it is essential that today over 40% of all retail transactions in this country - - nearly $1.5 trillion worth - - are consummated at franchised outlets. And anxiety about not knowing how to successfully conceive and launch a franchise network. What resources will be necessary? How long will it take? What personnel will I need - - and where can I get them? What type of franchise structures should be utilized? And how swiftly should I grow my franchise network?

Kaufmann Gildin understands the excitement. And we can alleviate the anxiety. Because Kaufmann Gildin possesses the full range of multidisciplinary skills, resources and business and legal judgment required successfully to usher new entrants into the franchise arena. We have done it - - and successfully - - countless numbers of times. For small companies. And for some of the world’s biggest. When Dun & Bradstreet and the Union Carbide Corporation determined to launch franchise programs, they turned to Kaufmann Gildin to get the job done.

At Kaufmann Gildin, the first issue addressed is not how to franchise. It is whether to franchise - - a subject too often overlooked by many business executives, attorneys and consultants. After all, franchising is only one of a myriad number of ways to distribute your company’s products or services to the public. Maybe it is well suited to your company - - or maybe not. Whether your company’s business format is franchisable at all; if it is, whether it should be franchised; or, whether better alternatives exist for distributing your company’s products or services are touchstone issues that receive a great deal of careful analysis by the attorneys at Kaufmann Gildin. After all, neither your company nor our firm will benefit from a failed franchise endeavor.

Assuming that franchising is the right path for your company to pursue, Kaufmann Gildin offers the full panoply of skills, business guidance and legal services required to successfully enter the franchise sector. Our franchise program formulation and planning activities are geared to ensure that the following areas, among others, have been adequately and fully addressed:

  • Identifying the type(s) of franchise relationships best geared to your company’s objectives (e.g. area development, unit, sub franchise, master franchise, conversion franchise and appropriate options for franchises).
  • Working with the new franchisor to determine the optimal economics of its franchise program by ascertaining appropriate initial franchise fees, continuing royalties, advertising fees and numerous other potential (but often unrecognized) “profit center” revenues.
  • Determining the geographic scope of the proposed franchise network (national/regional/top ADI’s only/unique, targeted markets only).
  • Ascertaining the proper timing and sequencing of the franchise rollout.
  • Structuring and financing the appropriate franchisor entity.
  • Ensuring that the franchisor entity is adequately capitalized (although nowhere memorialized, each franchise-regulating state requires a minimum net worth as a condition precedent to franchise registration).
  • Drafting all pertinent unit franchise/area franchise/sub franchise/master franchise/ conversion franchise agreements.
  • Drafting all necessary ancillary agreements (option agreements, leases, subleases, personal guarantees and non-competition agreements).
  • Preparing all required franchise disclosure documents necessary to engage in franchise sales activity, both in the United States and internationally.
  • Swiftly obtaining all domestic and international registrations necessary for the start-up franchisor to begin selling franchises.
  • Helping the start-up franchisor line up its management team and franchise sales team.
  • Assisting the start-up franchisor in preparing its operations manual.
  • Reviewing all franchise advertising with an eye toward compliance with applicable law.
  • Instructing sales and operations personnel on the legal requirements and restrictions pertaining to the offer and sale of franchises.
  • Helping the start-up franchisor to develop its own in-house legal/sales/marketing compliance program, so as to minimize the company’s future outside counsel fees.
  • Negotiating franchise transactions.
  • Creating and/or reviewing appropriate product or service supply relationships.
  • Creating a national/regional/local advertising structure and generating appropriate advertising standards.
  • Establishing the start-up franchisor’s “franchisee advisory council”.
  • Protecting the franchisor’s intellectual property (trademarks, service marks, patents and copyrights).
  • Reserving to the start-up franchisor the right to itself offer and sell products and services in franchise territories, either through retail outlets; electronic commerce; secondary distribution; or, through “non-traditional locations”.
  • Identifying the accounting, recordkeeping and reporting requirements to be imposed upon franchisees.
  • Ensuring that the franchisor has properly reserved the right to modify its system in the future to maximize its network’s ability to respond to competitive circumstances, changed demographics, new technology and the wisdom that experience provides.
  • Furnishing day-to-day advice and counsel on virtually every business and legal issue which a franchisor may confront.
  • If a dispute cannot be avoided through negotiation or mediation, representing the franchisor in court or arbitration with remarkable fervor, efficiency and results.