FRANCHISING REVIEWER mix Flashcards
SHE is known to be the first commercial franchisor
Martha Matilda Harper
the payment to franchisor based on the gross sale is
Royalty
the franchising born spear headed by blank in late 1950s
Ray Kroc Mcdonalds
most gasoline products sold through the blank system of franchising
Product Distribution
The franchisee not only uses the
franchisor’s brand and products but also follows a complete
business system provided by the franchisor, including
operations, marketing, training, and more
Business Format Franchise
often called the Franchise Disclosure
Document, or FDD, in many jurisdictions like the U.S.) is a
legal document that a franchisor must provide to a potential
franchisee before any agreement is signed.
Disclosure Statement
is to provide prospective
franchisees with information about the franchisor, the
franchise system and the agreements they will need to sign so
that they can make an informed decision.
FDD
e is a business model where the owner
of a trademark, business model, or system (the franchisor)
allows others (the franchisees) to operate a business using
their brand, processes, and support system
Franchise
is a legally binding contract between
the franchisor and the franchisee. This document outlines the
terms and conditions under which the franchise will operate,
including the franchisee’s rights, obligations, fees, and
duration of the agreement.
Franchise Agreement
A Business method of expansion that allows an
individual or a group of individuals to market a product or a
service and to use the patent, trademark, trade name and
systems prescribed by the owner
Franchising
is an individual or company that purchases the
rights to operate a business under the brand name and business
model of an established franchisor
Franchisee
THE OWNER OF THE BUSINESS
THAT PROVIDES THE PRODUCT/SERVICE
Franchisor
- The franchisee sells the franchisor’s
products but doesn’t necessarily operate the same business
model. Examples include car dealerships or soft drink
distribution.
Product Distribution
These fees are usually calculated as a
percentage of the franchisee’s gross sales or revenue and are
typically paid on a regular basis
Royalty Fee
refers to the legally protected brand name, logo,
slogan, or other distinctive symbols that represent a business
or franchise. The trademark is a key asset for the franchisor, as
it helps distinguish the franchisee’s business from others in the
marketplace.
Trademark
-refers to the activities of producing, buying,
selling, or exchanging goods and services to satisfy the needs
and wants of customers.
Business
in a business context refers to the amount of money
spent on producing goods, providing services, or running
business operations.
Cost
- in the franchising business refers to the
presence of other businesses whether they are other franchises
or independent companies that offer similar products or
services in the same market or geographic area.
Competition
is the name given to a
company, product, or service that distinguishes it from other
entities in the marketplace. It serves as a unique identifier and
is crucial for building brand recognition, trust, and loyalty
among consumers.
Brand Name
to the money or earnings that an
individual or business receives in exchange for labor, services,
or investments. It’s the total amount of money a person or
entity receives over a period of time, before any deductions
such as taxes or expenses.
Income
refers to something that can be physically
touched or perceived by the senses, particularly by touch.
Tangible
- refers to things that cannot be physically
touched or perceived by the senses, particularly by touch.
Intangible
- is a fixed, regular payment that an employee
receives from their employer in exchange for the work they
perform.
Salary
is a snapshot summary of how much a
company is worth on any given day. It reports the financial
condition (solvency) of the franchisor.
Balance Sheet
what a company owns: current, fixed and intangible
assets
assets
what a company owes: current and long-term
debt
liabilities
the company’s net worth; it is the
money the company has taken in from the sale of stock plus
any accumulated profits
stockholders’ equity
Minnesota follows federal regulations
in areas like tax law, labor law, and civil rights, but also has its
own state-specific rules
Minnesota Law
- is a legal contract between a
franchisor (the company or brand owner) and a franchisee (the
individual or entity purchasing the franchise).
Franchise Agreement
exists where a seller provides goods
or services to a buyer to enable the buyer to start a business;
A business opportunity
(often referred to as
a joint venture or partnership) is a collaboration between two
or more businesses or individuals to work together on a
specific project, product, or service
Joint Business Relationship
refers to a group of
individuals, organizations, or entities that share common
goals, concerns, needs, or interests.
Community of Interest
Most states that regulate franchise sales, the heart and soul of
Minnesota franchise sales regulation is the requirement that a
franchise offering be registered with a state administrative
official before it may be offered to anyone.
Regulations and Disclosure
is
the primary federal agency responsible for regulating
franchise businesses in the United States. Its primary
regulation is the Franchise Rule, which ensures
transparency and fairness in the franchise relationship
by requiring franchisors to disclose certain
information to potential franchisees
Federal Trade Commission or FTC
also govern
franchise agreements and the franchising process.
Some states have more stringent rules than the federal
requirements, designed to provide additional
protection to franchisees
State Regulation
: Requires state approval
before offering franchises.
Registration and Review
Franchisors file a notice with the state
but do not need approval.
Notice Filing
Franchisors only need to file the
FDD without state review or approval.
Disclosure-Only
The state performs a basic review
for compliance but does not deeply analyze the FDD.
Cursory Review
Certain franchisors are exempt
from filing or registration requirements if they meet
specific criteria.
Exemption Filing
FDD be delivered no later than 14
days before the prospective franchisee signs a contract
Cooling Off Provision
An “impound order,”
the franchisor is required to deposit all initial franchise fees
into the prescribed escrow account under a three-party
agreement between the franchisor, the bank and the Minnesota
Department of Commerce.
Financial Conditions to Registration
The potential franchisee should be given a duplicate of any
one-sided alterations affected by the franchisor to the
Franchise Agreement or other contracts that are part of the
Disclosure Document at least seven calendar days before
signing. This ensures that the franchisee will have sufficient
time to review the changes before signing the contract.
Material Changes to the Form Agreement
Revisions undertaken and negotiated by the franchisee or
entries clerical are excluded from disclosing a final version of
the Franchise Agreement at least seven days before signing.
Negotiating a Franchise
These involve third-party
agents or brokers helping sell franchise opportunities, but the
franchisor remains responsible for compliance with legal
requirements.
Independent Franchise Sales
In some cases, such as in specific
exemptions, an FDD may not be required. However, the lack
of an FDD can increase risks for potential franchisees, as they
may lack crucial information
No Mandatory FDD
Buyers should always conduct
thorough due diligence, consult with professionals, and review
the franchise agreement carefully, even if an FDD is not
mandatory.
Recommended Buyer Action
The franchisor is generally
required to provide an FDD to the prospective franchisee at
least 14 days before any contract is signed or payment is
made.
Franchisor’s FDD Obligation
Laws that govern the ongoing relationship between
franchisors and franchisees.
Franchise Relationship Regulation
Key Provisions of Minnesota’s Franchise Relationship
- Prohibition of Termination Without Good Cause
- Unfair Practices Provisions
Overcoming the challenges associated with adapting to
changing market trends in a franchise requires a multifaceted
approach, focusing on Agility, communication, research, and
innovation.
Adapting to changing market trends
Overcoming the challenges associated with dealing with
legal compliance issues requires a thorough understanding of
relevant regulations and policies, Staying updated on legal
requirements and industry trends establishing clear
compliance policies, and adopting effective risk management
strategies.
Legal Compliance Issues
Franchise management can overcome the challenges
associated with hiring and retaining employees by
implementing the following strategies:
Hiring and Retaining Employees
- Franchises can overcome the challenge of maintaining consistency across their brand by implementing effective
operational guidelines providing:
- Maintaining Consistency Across the Brand
Overcoming financial management issues in a franchise
requires identifying root causes, establishing a strong financial
system, employing financial technology tools, fostering open
communication, and vigilant planning
Financial Management
Businesses can choose among a wide range of distribution and
expansion strategies. Sometimes, the choice is obvious. At
other times, the choice is the consequence of an analytical
process.
Planning a Distribution Program
Businesses must assess the suitability of Franchising for their
products or Services. Franchising may not be ideal for
manufacturers focused solely on selling products.
SUITABILITY OF FRANCHISING SUITABILITY OF
FRANCHISING
