FDD & FRANCHISE LEGAL SERVICES

Legal Services

Below is an outline of the various legal services our franchise attorneys provide. Many of the legal services are included as part of our comprehensive Franchise Essentials Development Program. If you would like to schedule a free consultation with our senior team, please complete our Free Franchise Consultation Form. To learn more about our initial assistance and discovery process, please review the Getting Started page.

The Franchise Disclosure Document

The FTC requires 23 specific “Items” to be disclosed in the Franchise Disclosure Document concerning the franchise company and provisions contained in the Franchise Agreement. The system and process our FDD consultants and our franchise attorneys use when preparing the Franchise Disclosure Document ensure that all aspects of the franchise business are fully identified and properly disclosed. We advise you concerning every term and provision of the franchise relationship and assist you in completing our FDD legal questionnaire. The Franchise Disclosure Document is prepared by Counsel in conformance with the FTC Franchise Rule. This enables your company to begin offering and granting franchises in 31-36* “non-registration” states. An additional fourteen states have individual registration requirements that must be met prior to offering and selling franchises in those states (see “Registration State Filings” below).

Attachments & Exhibits to the Franchise Disclosure Document

The following attachments and exhibits to the Franchise Disclosure Document are prepared by Counsel, as required:

• Deposit Agreement
• Confidentiality & Non-Competition Agreement
• Area Development Agreement (see “Area Developer Program” below)
• Approved Location Addendum
• Lease Assignment & Addendum to Lease Agreement
• Telephone Number Assignment Agreement
• Conversion Franchise Addendum
• UCC-1 Financing Statement and Rider
• Sublease
• Guaranty of Franchisee’s Obligations
• General Release
• Software License Agreement
• Operation Manual Table of Contents
• Franchisee Closing Questionnaire
• List of State Administrators
• List of State Agents for Service of Process
• State Specific Addenda to the FDD**
• State Specific Addenda to the Franchise Agreement**

Area Developer (“multi-unit”) Program

An Area Developer Program permits a franchise company to sell multiple franchises to a single Franchisee for development over a prescribed time period. As part of the preparation of the Franchise Disclosure Document, we advise you concerning the structure and requirements for the Area Developer Program. Counsel will then draft the Area Development Agreement as an exhibit to the Franchise Disclosure Document.

Franchisee Support Services

We consult with you concerning the types of support services to be provided to Franchisees during the pre-opening period and once the franchise business is operational. We also advise you concerning additional support services that may be required as your franchise network grows. This ensures that proper disclosure is made in the FDD while permitting you to make modifications as changes to your business system are implemented.

Franchise Reporting Requirements & Performance Standards

Franchisees are typically required to provide information to the Franchisor regarding sales, financial data, income and sales tax returns, and other information specified by the Franchisor. Your FranSource FDD consultant will advise you concerning appropriate reporting requirements relative to the franchise business and your operation. In addition, we provide recommendations regarding minimum performance standards and/or inventory purchasing requirements when appropriate. When performance standards and/or inventory purchasing requirements are implemented, they are included in the Franchise Disclosure Document in compliance with the FTC Franchise Rule.

Franchise Territories

Franchisors may grant franchisees Exclusive Territories or Limited Protected Territories in which to operate the franchise business. In both cases, you agree that you will not open, or permit a franchisee to open, a franchise unit in another franchisee’s territory. However, a Limited Protect Territory simply means that you reserve the right to conduct certain activities within the franchisee’s territory. For example, you may reserve the right to sell your “secret sauce” to retailers, online, or through other channels of distribution. We advise and assist you in determining the criteria and system to be used to establish franchise territories. Territorial rights granted to franchisees are included in the FDD and Franchise Agreement.

Site & Location Specifications for the Franchise Business

Franchisors have the right to dictate the type, style, size, and other criteria specific to the franchise location. We consult with you to establish appropriate requirements and criteria for the site selection process. As part of this process, we produce a Site Evaluation Form to be completed by franchisees when submitting potential sites for your approval.

The Franchise Fee, Royalty Fee & Other Sources of Franchise Revenue

Using established criteria as well as statistics compiled from similar type companies, we determine the franchise fee, royalty fee, advertising and marketing fees, and other fees appropriate to the franchise operation. We also provide recommendations and considerations related to other possible sources of franchise revenue, including administrative fees, regional and national advertising fees, product sales, training and field support fees, and other related franchise services.

Intercompany License Agreement

If applicable, franchise counsel will draft an Intercompany License Agreement between your new franchise legal entity and your existing operation legal entity, which grants your franchise legal entity the right to sub-license your company’s trade name(s), trademark(s) and other intellectual property to franchisees. This enables you to use your existing operation as the basis for providing financial performance representations in Item 19 of the FDD and making other similar disclosures.

Trademarks & Copyrights

As part of the development of the Franchise Disclosure Document, trademark counsel can advise you concerning trademarks, service marks, and copyrights that will be licensed to franchisees under the Franchise Agreement. If neccessary, we will refer you to our trademark attorneys to complete trademark and/or copyright filings. Such services and the related costs and fees are invoiced separately by trademark counsel.

State Exemption Filings

Of the 36 non-registration states, five states require franchise companies to complete an “exemption filing” prior to commencing the sale of franchises in their state. The filing is required under each state’s Business Opportunity Laws. If you elect, Counsel will assist you in filing the exemption notices in the five states, which include Florida, Kentucky, Nebraska, Texas, and Utah. Such services and the related costs and fees are invoiced separately by franchise counsel.

State Registration Filings

There are 14 states in the U.S. that require franchise companies to submit Franchise Registration Applications for approval prior to commencing the offer and sale of franchises in these states. The states include California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you elect, Counsel will prepare and submit Franchise Registration Applications to the states in which your company desires to offer and grant franchises. Such services and the related costs and fees are invoiced separately by franchise counsel.

Develop an Appropriate FDD and Avoid Cookie-Cutter Templates

As you consider your options for an FDD consultant, watch out for cookie-cutter programs. FDD templates can be tempting, but they result in FDDs that will cause confusion with prospective franchisees and potentially get your franchise in legal trouble if all required disclosures are not made in the FDD. FranSource leverages its experience and knowledge to guide you through the process while ensuring every detail is covered and your FDD fully represents your franchise.

If you want advice and guidance from an experienced franchise development specialists, give us a call or complete our 15-question quiz as an initial indicator as to whether your business is ready to franchise. For legal compliance, operational excellence, marketing for the franchise concept and the local franchise locations, and franchise sales, FranSource offers a one-stop shop to ensure your franchise success.

* Five of the 36 “non-registration” states require the filing of an “exemption form" prior to offering franchises in the state (see “State Exemption Filings” below). Six states (CT, GA, LA, ME, NC, and SC) have requirements that must be met if a franchisor does not have a federally protected trademark (a state registered trademark is accepted by GA, LA, and SC). The requirements may include filing under each state’s Business Opportunity Laws if you do not have a federally protected trademark (which is common with new franchise companies). Please contact us for additional information and requirements.

** The State Specific Addenda are prepared as part of the Franchise Disclosure Document development process to ensure compliance with individual state franchise laws and regulations when registering in any of the 14 Registration States. The State Specific Addenda address individual state franchise laws and regulations that vary from the FTC Franchise Rule relative to specific provisions of the Franchise Agreement and FDD disclosure requirements. The State Specific Addenda help expedite the franchise registration process. Please refer to “State Registration Filings” above.