{"id":612,"date":"2015-05-11T12:00:18","date_gmt":"2015-05-11T19:00:18","guid":{"rendered":"http:\/\/sintelsystemspos.com\/?p=612"},"modified":"2015-05-05T10:22:34","modified_gmt":"2015-05-05T17:22:34","slug":"let-your-franchised-business-soar-but-first-get-grounded-in-franchise-legislation","status":"publish","type":"post","link":"https:\/\/sintelsystemspos.com\/ja\/let-your-franchised-business-soar-but-first-get-grounded-in-franchise-legislation\/","title":{"rendered":"Let Your Franchised Business Soar! But First, Get Grounded In Franchise Legislation"},"content":{"rendered":"


\n\"succeed-green-button\"<\/a>It\u2019s a pivotal moment for your booming business: the possibility of becoming a successful franchisor.<\/span><\/p>\n

Before going any further, it’s time to get up to speed with the complexities of franchise legislation.<\/span><\/p>\n

We spotted a thorough roundup on the topic of state and federal franchise laws in a recent blog post at TweakYourBiz.com that is well-suited to the necessary first step towards growing a successful franchise organization.<\/span><\/p>\n

Given the strong presence Sintel Systems has in the retail, restaurant and service industries’ point of sale marketplace, we share articles and commentary with our customers and franchise hopefuls looking for key insights and opportunities in order to help them make the best decisions from the very beginning.<\/span><\/p>\n

The article gives a good general understanding of franchise legislation, however TweakYourBiz.com recommends that you consult with an experienced franchise lawyer. Here are the highlights of the post, “Franchising your business? What you need to know about franchise legislation!”:<\/span><\/p>\n

\u2022 State franchise legislation is anything but uniform. Also, state and federal laws that govern “business opportunities” and “seller-assisted marketing plans” can also apply to franchising.<\/span><\/p>\n

\u2022 Overall, franchising is regulated by the U.S. Federal Trade Commission (FTC). State agencies’ franchise laws apply only when: the offer or sale of a franchise is made in the state; or the franchised business will be located in the state; or the franchisee is a resident of the state.<\/span><\/p>\n

\u2022 According to federal law and under the FTC Franchise rule, three elements are required for a franchise, that is to say, Trademark. If these three elements are present, the relationship will be a \u201cfranchise\u201d for purposes of the FTC Franchise Rule:<\/span><\/p>\n

(1) Trademark: The franchisee has the right to distribute goods and services that bear the franchisor\u2019s trademark, service mark, trade name, logo and other commercial symbol used for transaction.<\/span><\/p>\n

(2) Significant Control or Assistance: The franchisor has notable control of, or provides significance to, the franchisee\u2019s method of operation, which usually includes: approval of the site, requirements for site design or appearance, designated hours of operation, specified production techniques, required accounting practices, required participation in promotional campaigns, training programs, and providing an operations manual.<\/span><\/p>\n

(3) Required Payment:\u00a0 To buy or own a franchise, the franchisee needs to pay the franchisor (or an affiliate of the franchisor) a minimum of US$500 either before (or within 6 months after) opening the business. The required payment includes any payments the franchisee makes to the franchisor to get the right of a franchisee. It would include franchise fees, royalties, and training fees, payment for services and payments from the sales of products (unless reasonable amounts are sold at bona fide wholesale prices).<\/span><\/p>\n

\u2022 State franchise laws do vary, but all work upon a common theme. The TweakYourBiz.com post notes that in 12 states, the three elements of the legal definition of a \u201cfranchise\u201d are:<\/span><\/p>\n

(1) Marketing Plan: The franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system substantially prescribed by the franchisor.<\/span><\/p>\n

(2) Association with Trademark: The operation of the franchisee\u2019s business is substantially associated with the franchisor\u2019s trademark, trade name, service mark, etc.<\/span><\/p>\n

(3) Required Fee: The franchisee is required to pay a fee, directly or indirectly.<\/span><\/p>\n

\u2022 Generally speaking, there are three categories of laws that regulate franchises:\u00a0<\/span><\/p>\n

(1) Disclosure Laws regulate required pre-sale disclosures, prohibited franchise sales practices, and mandatory cooling-off periods before franchise sales.<\/span><\/p>\n

(2) Registration Laws require registration of the franchise, registration of franchise salespersons, and registration of franchise advertising.<\/span><\/p>\n

(3) Relationship Laws govern certain aspects of the relationship between franchisor and franchisee, such as grounds for terminating a franchise, notice and cure periods before termination, grounds for not renewing a franchise, and equal treatment of franchisees.<\/span><\/p>\n

\u2022 Among the most common types of violations of franchise laws include: offering or selling an unregistered franchise, failing to provide a UFOC on time, failing to provide all required disclosures in the UFOC, making misrepresentations to franchisee prospects, improperly terminating or not renewing a franchise.<\/span><\/p>\n

\u2022 Governmental penalties for violating franchise laws include: fines, permanent bans on engaging in franchising, freezing of assets, and money damages for victims.<\/span><\/p>\n

\u2022 Violations of state franchise laws are typically treated as a fraudulent and deceptive trade practice, or a misdemeanor, or a felony. Jail sentences may be applied to the franchisor, and to its officers, directors, and managers who formulate, direct or control the franchisor\u2019s activities.<\/span><\/p>\n

\u2022 The post notes that in some states, a franchisee who has been harmed by the franchisor\u2019s conduct can be awarded money damages (including punitive damages and attorneys\u2019 fees), or cancellation of the franchise agreement and reimbursement of all fees paid to the franchisor.<\/span><\/p>\n

The post concludes with helpful commentary on what potential franchisees must consider when pursuing a franchise opportunity. Highlights of the section include the following salient points:<\/span><\/p>\n

\u2022 Franchisee investment questions to be considered include:<\/span><\/p>\n

– How much money do you want to invest?<\/span><\/p>\n

– How much money can you afford to lose?<\/span><\/p>\n

– Are you purchasing the franchise alone or with partners?<\/span><\/p>\n

– Do you need financing? Where\u2019s it coming from?<\/span><\/p>\n

– What\u2019s your credit rating? Credit score?<\/span><\/p>\n

– Do you have savings or additional income to live on while you start your business?<\/span><\/p>\n

– Capability & skills<\/span><\/p>\n

– Does the franchise require technical experience or special training or education?<\/span><\/p>\n

– What special skill set can you bring to a business, and, specifically, to this business?<\/span><\/p>\n

– What experience do you have as a business owner or manager?<\/span><\/p>\n

– Your ultimate business objective<\/span><\/p>\n

\u2022 It is helpful to write down your reasons for buying a particular franchise:<\/span><\/p>\n

– Do you need a specific annual income?<\/span><\/p>\n

– Are you interested in pursuing a particular field?<\/span><\/p>\n

– Are you interested in retail sales or performing a service?<\/span><\/p>\n

– How many hours can you work? How many are you willing to work?<\/span><\/p>\n

– Do you intend to operate the business yourself or hire a manager?<\/span><\/p>\n

– Will franchise ownership be your primary source of income or a supplement to your current income?<\/span><\/p>\n

– Do you get bored easily? Are you in this for the long-term?<\/span><\/p>\n

– Would you like to own several outlets?<\/span><\/p>\n

– Apart from knowing Franchise legislation and legal requirement, you should also investigate the franchisor and business to make sure you are investing in the right franchisee.<\/span><\/p>\n

\u2022 Under the FTC’s Franchise Rule, potential franchisees must receive a copy of the Disclosure Agreement at least 14 days before they are asked to sign any contract or pay any money to the franchisor or an affiliate of the franchisor.<\/span><\/p>\n

\u2022 Check the franchisor’s background along with the business background. Identify the executives and their general business backgrounds, their experience in managing a franchise system, and how long they\u2019ve been with the company.<\/span><\/p>\n

\u2022 Check the franchisor’s litigation history. Determine if the franchisor or any of its executives have been convicted of felonies involving fraud, violations of franchise law, or unfair or deceptive practices, or are subject to any state or federal injunctions involving similar misconduct.<\/span><\/p>\n

\u2022 Calculate initial and ongoing costs involved in starting and operating a franchise. Be sure to ask the franchisor about continuing royalty payments, advertising payments to local and national advertising funds, grand opening or other initial business promotions, business or operating licenses, product or service supply costs, real estate and leasehold improvements, discretionary equipment such as a computer system or a security system, training, legal fees, financial and accounting advice, insurance, health insurance, employee salaries and benefits, and the costs of compliance with local ordinances such as zoning, waste removal, and fire and other safety codes.<\/span><\/p>\n

\u2022 Starting your business may take several months, so be sure to estimate your operating expenses for the first year, and your personal living expenses for up to two years. “Compare your estimates with what other franchisees have paid and with competing franchise systems,” writes TweakYourBiz.com. “You may be able to get a better deal with another franchisor. An accountant can help you evaluate this information.”<\/span><\/p>\n

Read the full TweakYourBiz.com post here<\/span><\/a>.<\/span><\/p>\n

For more insights into the franchising mindset, check out our related posts,\u00a0Points of Fail \u2014 And How to Avoid Them<\/span><\/a>, and Franchise Red Flags<\/span><\/a>.<\/span><\/p>\n

Before you make your franchise move, consider calling Sintel Systems for a free phone consultation to help weigh and understand your point of sale (POS) options. We serve as a franchise incubator for clients across the retail, restaurant and service industries, forming lasting partnerships with our clients that you simply can\u2019t get from a reseller.<\/span><\/p>\n

Sintel Systems<\/span><\/a>\u00a0is the only direct to end user full-service provider of tailored Point of Sale systems across retail, restaurant and service industries, including\u00a0frozen yogurt shops<\/span><\/a>,\u00a0pizzerias<\/span><\/a>,\u00a0sushi restaurants<\/span><\/a>,\u00a0caf\u00e9s<\/span><\/a>\u00a0and\u00a0retail stores<\/span><\/a>.<\/span><\/p>\n

As a single source for business solutions, our experienced, knowledgeable team negotiates the complex POS landscape for you to enable you to find the right POS system for your business and budget.\u00a0Hardware<\/span><\/a>\u00a0–\u00a0Software<\/span><\/a>\u00a0–\u00a0Support<\/span><\/a><\/span><\/p>\n

Questions or Comments:\u00a0Contact us<\/span><\/a>\u00a0855-POS-SALES\u00a0www.SintelSystems.com<\/span><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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