Frequently Asked Questions

Being committed to helping your franchises succeed, which really entails providing franchises with a proven system of operation, training them to follow your system, and motivating them to perform at their highest level. Think about any successful franchise company. What do you see when you look at it? Hopefully it is their CONSISTENCY of operation.  You know that no matter which location you visit, you expect to receive the same product or service. Period.

Which means that the franchisor focused on the highest priority…training their franchises to operate the business according to the franchisor’s system, AND motivating them to do so.

Can your system be taught? Can you motivate others to perform at their highest level? Can you instill a desire in individuals to hold true to your company’s beliefs and values? If so, you have the potential to be a successful franchisor.

While it is impossible to guarantee a specific level of success, FranSource performs a great deal of due diligence prior to committing to developing a company's franchise operation. We do so to ensure that our clients will be successful. For clients selecting our Franchise Essential Program, a large portion of our fee is directly tied to the sale of your first six franchises.  With a personal stake in the successful launch of the franchise, we are careful to work with companies that we are very confident will be successful. From a statistical standpoint, industry surveys indicate that a new franchise company will sell approximately six to nine franchises during the first year. Over 90% of our clients have achieved or exceeded these numbers. And for most of our clients, the first two to three franchise sales provide a complete return on their development costs.

The short answer is that a lack of profitability does not necessarily mean that the franchise will be unattractive to prospective franchisees.  If you incurred expenses beyond those expected for a typical individual franchise operation, your financial statements will indicate this. Most franchise prospects will review the company's financials with their CPA or other financial adviser as part of their due diligence.  Their CPA will be able to advise them concerning extraordinary expenses related to the company’s growth and the impact it has had on profitability.  The CPA will identify those expenses that a franchisee should not incur as part of the franchise operation, and assist in producing a pro forma that more accurately reflects a typical franchise location. 

It is NOT necessary to have a federally protected trademark in order to begin franchising. The franchisor must simply disclose in the UFOC that the trade name is in process of being registered.

When franchising, a franchisor is granting a franchisee the right to operate their business using the franchisor's trade name.  For this reason, it is important that the franchisor’s trade name (and trademarks) be protected, which requires registering with the United States Patent & Trademark Office (USPTO).  Since the process to register a trade name/trademark takes an average of one year to complete, it is important to commence registering the company’s trade name early in the development process.  FranSource works with the law firm of Sand & Sebolt to register copyrights, patents and trademarks.

Please note that there are a few “non-registration” states that require a federally protected mark as a condition of being exempted from their business opportunity laws. However, in lieu of an approved trade mark, a franchisor may simply file under the Business Opportunity requirements of the state until such time as the trade name has been registered by the USPTO.   

As previously stated, a successful franchise starts with a system of operation that is duplicatable. The majority of independent businesses typically operate with very little written documentation. The best advice we can give is “write everything down.” This means making notes on the processes and procedures required to successfully operate your business. This does not mean you have to write a novel. What is important is that you have the basics of the system written down. Make notes…jot down ideas. This information will aid you greatly when you begin developing your franchise operation.

There are a number of variables that impact the franchise fee and royalties charged by a franchise company. They include the sophistication of the system, the length of the training program, the franchisor’s costs related to acquiring a franchise (i.e. advertising, sales, materials), the initial support required to get the franchise up and running, and the potential return on investment for the franchisee. Additional considerations relate to the supplies, materials, or inventory that may be included with the franchise, the type of advertising and marketing support provided by the franchisor on an ongoing basis, and the size of the franchise territory being granted.

FranSource assists our clients in determining the appropriate fees based on industry research and a detailed analysis of the franchise offering.

First of all, franchisee initiated lawsuits are fairly rare when you consider the number of franchise companies and franchises that exist today. Second, the key to avoiding conflict and litigation is to ensure that you provide the training and support necessary to help your franchises be successful. If franchisees are making money, very rarely will they be tempted to initiate a lawsuit against the franchisor. In addition, care must be taken to ensure that the franchisor’s legal documents are in compliance with all applicable state and federal laws and regulations. Failure to do so will make it much easier for a franchisee to prevail in a case against a franchisor.