MOMENTUM FRANCHISING
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ABOUT FRANCHISING

WHAT IS A FRANCHISE?

A franchise is a license to use the Franchisor’s trademark and proprietary business system at a particular location or within a certain geographic territory for a defined period of time.

HOW DOES THE FRANCHISOR MAKE MONEY?

As a franchisee you pay a number of fees to the franchisor. Some of these fees are one-time, like the franchise fee, but, most are ongoing: royalties, national advertising, regional advertising, technology and vendor rebates. These ongoing fees can be collected monthly or weekly.

WHAT ARE THE BENEFITS OF JOINING A FRANCHISE?

By joining a franchise you get an established brand, business training, a detailed operations manual, ongoing corporate support, a supportive franchisee network, vendor relationships and quality control.

HOW IMPORTANT IS THE FRANCHISE INDUSTRY

While franchises make up less than 3% of all businesses, they represent nearly 12% (1 in 8 jobs) of all jobs. Franchises make up 10% of total Gross Domestic Product (GDP)

PROS & CONS OF FRANCHISING

pros

  • High Success Rate Versus a Startup

  • Proven Business Model

  • Marketing & Brand Awareness

  • Combined Buying Power

  • Transparent and Easy-to-Conduct Research

CONS

  • High Fees

  • Ongoing Royalties

  • Authority of the Franchisor

  • Conflict of Interest with the Franchisor

  • Required Vendors

THE FDD | “THE FRANCHISE BIBLE” 

 

WHAT IS THE FDD?

The franchise disclosure document (FDD) is a legal disclosure document that must be given to individuals interested in buying a U.S. franchise as part of the pre-sale due diligence process. It contains information that is essential to potential franchisees who are about to make a significant investment. The FDD is a very long document (often 200+ pages) that outlines comprehensive information about the roles of both parties involved in the franchise—the franchisor and the franchisee. The document allows the potential franchisee to make an honest and informed decision about his investment into the business. The document is divided into 23 sections that the potential franchisee MUST review before signing. 

WHAT ARE YOUR RIGHTS WITH THE FDD?

According to the FTC, franchisors have an obligation to provide the franchisee with the financial disclosure document at least 14 days before it needs to be signed or before any initial money is exchanged. The franchisee has a right to a copy of the FDD after the franchisor has received the application and agreed to consider it. 

DO MOST PEOPLE READ THE ENTIRE FDD?

No. But you really need to. Those who do not read the FDD, in its entirety, are far less equipped to negotiate their franchise deal and are less prepared to open their franchise successfully.

WHAT ARE SOME OF THE MOST IMPORTANT SECTIONS OF THE FDD?

ITEM I and II: Company Background and Management
ITEM III and IV: Litigation and Bankruptcies
ITEM V and VI: Fees
ITEM VII: Initial Investment Costs
ITEM XV: Participation Requirement
ITEM XIX: Financial Performance
ITEM XX: Store Counts
ITEM XXI: Franchisor Financials

WHAT DO YOU THINK?

 

I THINK WE NEED TO TALK.

I AM SO READY TO GET STARTED.

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