Question: “I understand that I only need to have a Franchise Disclosure Document drafted to begin selling franchises. If so, can I simply hire a franchise attorney to begin offering franchises?“
The simple answer is, “Yes.” Just like you can get into a car, start the engine and begin to drive without ever having been instructed. CAN you do it? Yes. But the odds of “failing” dramatically increase. Why? Because you haven’t yet learned all of the critical nuances involved in operating a vehicle.
The same holds true for franchising. “Legally,” you can begin to offer franchises once a franchise attorney prepares an FTC compliant Franchise Disclosure Document and completes any applicable franchise pre-offering compliance requirements at the state level. However, by only focusing on the legal aspects of the franchise development process, a startup franchise company greatly increases the risk that their franchise operation will ultimately fail.
Experienced franchise attorneys admit that a high percentage of franchisors who only engage a franchise attorney to draft the required Disclosure Document ultimately fail at franchising. Franchising a business and building a successful franchise operation involves much more than drafting legal documents. The major components include operations, training, marketing, sales, support, and communications. Failing to address each of these areas compromises the integrity of the franchise offering.
This is where the assistance of experienced franchise consultants pays off. Rather than only focusing on the legal aspect of the franchise structure, a franchise consultant considers the total picture and helps the company determine how best to structure each component of the franchise operation. Ultimately, the consultant assists the company (and the franchise attorney) in developing a more robust franchise offering.
Consider the process of drafting the Franchise Disclosure Document. When a business owner begins evaluating the idea of franchising their business, they learn that technically, drafting a disclosure document and complying with each state’s franchise and business opportunity laws is “all” that is required to begin selling franchises. For many business owners, this simply sounds like “legal work” to them. They figure the attorney will ask questions and they will provide answers.
What the business owner fails to realize is that determining the franchise structure and relationship requires evaluating many different business aspects. A franchise consultant will discuss various options and scenarios with the company and work in conjunction with the franchise attorney to identify all of the issues that need to be addressed. For this reason, most franchise attorneys appreciate the added insight that an experienced franchise consultant provides when developing the Disclosure Documents.
In addition, a franchise consultant will assist the company in developing other key components of the franchise operation. The consultant can also provide ongoing assistance and support once the company begins offering franchises. For these reasons, businesses that strive to develop a successful franchise operation are wise to engage both experienced franchise attorneys and consultants who work together to develop the ideal franchise system.
Steve Vandegrift is President of FranSource International, Inc., a full-service franchise development and consulting firm founded in 1997. FranSource works with both startup and existing franchisors, providing the comprehensive assistance and support required to develop, operate, and grow a successful franchise operation. Please feel free to email Steve at steve@fransource.com with your comments and questions.
