Question: “I understand that I only need to have a Franchise Disclosure Document to franchise my business. If so, can I simply hire a franchise lawyer to prepare the Franchise Disclosure Document and 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, and simply put, you don’t know what you don’t know.

The same holds true when franchising a business. Experienced franchise attorneys admit that a high percentage of franchisors who only engage a franchise lawyer to draft the Franchise Disclosure Document, and do not engage with an experienced franchise development consultant, typically fail at franchising. Legally, you can begin to offer franchises once a franchise lawyer 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 aspect of the franchise development process, a startup franchise company greatly increases the risk that their franchise opportunity will fail.

Because the internet (and AI) has made researching franchise opportunities so easy, prospective franchisees can evaluate a franchise and compare it against other franchises they are considering without contacting the franchise company. This is where a franchisor that has only invested in the development of their Franchise Disclosure Document and little else will quickly find themselves at a disadvantage. The prospective franchisee has taken a “look under the hood” and found their franchise offering lacking.

Franchising a business and developing a successful franchise operation involves much more than drafting a Franchise Disclosure Document. The major systems when developing a franchise operation include legal, operations, marketing, and sales systems, while there are additional sub-systems such as franchise training, support, and communications. Failing to fully address each of these components compromises the integrity and appeal of the franchise offering.

This is where the assistance of an experienced franchise consultant pays off. Rather than only focusing on the legal aspects of the franchise offering, an experienced franchise consultant considers the entire picture and helps the company determine how best to structure and develop each component of the franchise operation. The franchise consultant ultimately assists the company in developing a robust franchise offering that will appeal to prospective franchisees.

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 certain states 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 assume the franchise lawyer will ask them questions and they will simply provide answers, and the Franchise Disclosure Document will be done.

What the business owner fails to realize is that determining what the franchise relationship will entail requires evaluating both the legal and business aspects of the relationship. An experienced franchise consultant will discuss specific terms and provisions of the relationship with the business owner and work in conjunction with the franchise lawyer to identify all of the terms and conditions that need to be addressed and disclosed in the Franchise Disclosure Document. The franchise consultant will also provide advisement regarding the actual terms and provisions of the Franchise Agreement and assist the business owner in determining what the terms and provisions of the franchise relationship should be. For this reason, franchise attorneys appreciate the added insight that an experienced franchise consultant can provide when developing a client’s Franchise Disclosure Document.

The franchise consultant will also advise and assist the company in developing other key components of the franchise operation, including the Franchise Operations & Policies Manual, the franchise sales process the company will follow, franchise advertising programs (“lead generation”), technology solutions, franchise communications and support programs, and other important aspects inherent to a robust franchise operation. The franchise consultant can also provide ongoing advisement and assistance once the company begins offering franchises in the areas of franchise operations, communication, support, training, advertising and marketing, and sales. For these reasons, businesses that desire to develop a successful franchise operation are wise to engage both an experienced franchise lawyer and franchise consultant who work together to develop the ideal franchise system.

If you would like to learn more about FranSource’s franchise development process and services, please contact us for additional information.