What You Should Know About the FDD?

Franchise Disclosure Document (FDD), formerly called the Uniform Federal Offering Circular, (UFOC) provides prospective franchise investors with information about a prospective franchise. Company history, background information, risk factors and financial statements are just a few of the items covered.

To protect and inform the investor, the Federal Trade Commission (FTC) determined that a standardized disclosure must be in place for companies to offer their businesses as a franchise. Because the format is standardized, it makes for easy side-by-side comparisons between companies.

The FDD is provided to potential investors of franchises. Which means that this document is usually given to prospective investors who have made efforts to qualify for any particular franchise.  Usually a dialog has been established between the investor and the franchisor before the FDD is requested.

Regarding the format of the FDD. It consists of cover pages, table of contents, main body and exhibits.

The cover pages are straight-forward. They contain the name, address, contact information and basic business information. It also stresses how the FDD should be used and where to go for additional help.  There is also a state cover page which informs the investor that there may be state franchise laws. 

Additionally there is a paragraph on Risk Factors. This area points out potential risks inherent in the particular investment.

The table of contents simply list out the items that make of the body and exhibits of the FDD.

The main portion of the FDD is comprised of twenty-three items.

Item 1: The Franchisor and any Parents, Predecessors and Affiliates

Item 2: Business Experience

Item 3: Litigation

Item 4: Bankruptcy

Item 5: Initial Franchise Fee

Item 6: Other Fees

Item 7: Estimated Initial Investment

Item 8: Restrictions on Sources of Products and Services

Item 9: Franchisee’s Obligations

Item 10: Financing

Item 11: Franchisor’s Assistance, Advertising, Computer Systems and Training

Item 12: Territory

Item 13: Trademarks

Item 14: Patents, Copyrights and Proprietary Information

Item 15: Obligation to Participate in the Actual Operation of the Franchise Business

Item 16: Restrictions on What the Franchisee May Sell

Item 17: Renewal, Termination, Transfer and Dispute Resolution

Item 18: Public Figures

Item 19: Financial Performance Representations

Item 20: Outlets and Franchisee Information

Item 21: Financial Statements

Item 22: Contracts

Item 23: Receipts

In addition, there may be a number of Exhibits. These may include:

List of State Agencies/Agents for Service of Process
Franchise Agreement with Exhibits
Financial Statements
Lease
Collateral Assignment of Lease
Operations Manual
List of Franchisees, Current and Former
Release
Assignment of Franchise Agreement
State Addendums
Spousal/Partner Consent

To be able to invest in any franchise business, you will be required to have received the FDD. By familiarizing yourself with the format, you will have a better understanding of the franchise purchase process. Consider enlisting the assistance of a franchise consultant to aid you in your franchise search.

What is a CFE?

A Certified Franchise Executive (CFE) is a person who has chosen to take his career in franchise to the next level. He does this by taking a total of 3500 hours of continuing education classes which include courses in experience, participation, core, and electives. Experience and participation classes count for 500 hours each; core classes count for 1600 hours; elective course work earns a CFE student 900 hours.

Those who choose to become CFEs demonstrate that they have taken the initiative to continue their education above and beyond what is or may be required for franchise operations. CFE students are able to reach new goals in such areas as professional development and career planning.

In addition, those who achieve CFE certification also display a sense of pride and self-fulfillment: both personal and professional, and exhibit dedication and loyalty to their careers. Further, they show others how much they believe in the franchising industry and their decision to pursue a career in that area.

Becoming a Certified Franchise Executive allows you to place the letters "CFE" after your name, just as you would any other title or educational accomplishment. When people see this, they are aware that you have voluntarily committed yourself to a higher standard in the franchising field.

Further, becoming a CFE casts you in a more positive light when it comes to seeking employment or working towards a promotion or other type of career advancement.

In order to be eligible to pursue a CFE, a person must be considered as already being active in the franchising field. From there, all necessary requirements of the CFE program must be successfully completed.

A person pursuing CFE certification may take the required courses on his own time, working them around his individual schedule. However, all courses must be completed within three years after he has enrolled in the program. Average completion time is usually 1½ to 2 years. If a person has not completed the program by the end of the third year, it will be necessary for him to enroll again in the problem. This will incur an additional enrollment fee.

A person will be notified when he is getting close to the three-year deadline. In this way, he can arrange to either speed up the process or prepare for re-enrollment.

Anyone who is employed in the franchise industry would do well to consider achieving CFE certification.

Contact one for FranFinders franchise consultants to learn more about franchises and the franchise industry.

What's in a Franchise Agreement?

Franchises are different; therefore, franchise agreements must by necessity be different in scope and tone. However, there are certain provisions that are or should be included in most franchise agreements.

• Obligations of both franchisors and franchisees concerning business operations must be spelled out, in as complete detail as possible.
• The amount of training and operational support that the franchiser will be responsible for providing must be clearly stated. This information should also include the cost of the training and operational support.
• The territory in which you are allowed to operate your franchise must be plainly stated. In addition, any exclusion which may apply must also appear in this section.
• How long the franchise agreement will be in force must be included in the document. Renewal rights must also be stated.
• The amount of investment required by the franchisee must appear in the agreement.
• Guidelines and regulations concerning trademarks, patents and signs and the rights and responsibilities of the franchisee as pertaining to them must be included in the agreement, and written in such a manner that the franchisee will be able to follow them with minimal, if any, problems.
• Fee amounts, including franchise, royalty, and service fees for which the franchisee is responsible must be stated in the agreement.
• The responsibilities of both franchisee and franchisor where tax issues are concerned must be addressed. 
• Conditions and restrictions on the sale or transfer of the franchise must be clearly stated.
• Any advertising policies that must be adhered to by the franchisee should be plainly stated.
• How franchisee termination issues will be handled must be included in the agreement.
• Dispute settlement guidelines must be in the agreement. Further, the paragraphs addressing these must include how the company will settle disputes, how disputes concerning operating practices will be handled, dispute cancellations, and who will be responsible for attorney fees.

By contacting one of FranFinders expert franchise consultants, you can be referred to a competent franchise attorney that can review any franchise agreement sample.

How to Leave your Job Correctly

If you are considering investing in a franchise, there are quite a few things you are going to have to accomplish before you can even think about quitting your job. Some of them may be easier than others, but you should concentrate on having fulfilled them all before you turn in that notice.

• Of course, the first order of business is to figure out what type of franchise you want to invest in. This should definitely be done before quitting your current job.
  
• You want to have the franchise business you have chosen to be operating on at least a part-time basis before you quit. In order to do this, you will most likely have to go ahead and pay the franchise and other start-up fees, so you will have already invested at least some money into the franchise.
  
• Since you will in essence be working two jobs, it is better to have the franchise operating on a part-time basis, at least for the first little while. Otherwise, unless you can employees to keep it open full-time without your presence being required, you are going to essentially be working two jobs, which means you will have no time for family or other activities. Stretching yourself that thin may cause you problems on your current job. This may lead to your having to quit before you are truly ready.
  
  
• Have a back-up plan. If the franchise fails, you are going to need something to fall back on, either savings or another source of income, or the ability to return to your previous employment. Do not quit until you have established this back-up plan.
  
• Don't quit your job until you are certain you are completely ready. Make sure you have everything in place, including a good business plan, additional income, preferably in the form of savings to cover personal and living expenses, and money that you can put back into the business. Also, check to see what you need to do about keeping your current insurance policies, including health and life. Make sure your back-up plan is in place, and most importantly of all, make sure you have the wherewithal to make your new business work.

Once you have all that in place, you can then confidently walk into your supervisor's office, or the Human Resources Department, and hand in your two weeks notice.

If quitting your job is a priority for you, then Consider using the advice of one of FranFinders expert franchise consultants to assist you with your goal.