Why not go directly to the franchises instead of going through a consultant?
We use our industry experience to give you all the information you need while you are buying a business. We know which franchises are the least risky, most reliable, and most profitable in the business. If you are outside this industry, this kind of knowledge could take several months to gather. Because our service is free, we are here to help save your money, your time and your sanity during a huge and potentially complex decision about your future.
What will it cost me to use a consultant for my franchise purchase?
Nothing but time for both of us.
Why would a franchisor want to pay a franchise Consultant?
They love it. It saves them time and money. We bring interested and qualified potential franchisees, not easy or inexpensive to find. We also are a mutual resource for both the company and our client.
How does it work? How will the Consultant find the best opportunity for me?
We work to identify your specific criteria, profile “Vision”. This is critical to provide you the best matches. No throwing darts against a franchising map. This is a very specialized process.
How long will it take to get my business started?
It varies. If you are looking to move forward, we can complete our initial franchise consultation process in a few days. Most clients can find a great opportunity in anywhere from a few weeks to a few months. Once you have purchased your opportunity, it can typically range from 2-12 months to get your business going.
Do I need to know the industry to buy the franchise?
No, in fact, many companies prefer that you have no experience in the industry prior to owning their franchise. This works well for the franchisor to be able to train a franchisee from scratch. Franchisors want people that can take care of customers, hire, train and motivate employees, close sales, manage efficient operations market and build their franchise. They do not want their owners doing the hourly labor, but running and scaling the business.
Franchise Terminology – Acronyms
Franchise Acronyms:
AD – Area Developer
AR – Area Representative
FDD – Franchise Disclosure Document
FTC – Federal Trade Commission
FPR – Financial Performance Representative
FSI – Franchisee Satisfaction Index
IFA – International Franchise Association
UFOC – Uniform Franchise Offering Circular
Franchise Terminology
Acknowledgement of Receipt: Item 23 of the Franchise Disclosure Document (FDD) that is signed by the prospective franchisee and provided to the franchisor (in hard copy or electronically signed) as proof of the date the FDD was received by the prospect.
Advertising Fee/Fund: An amount paid by the franchisee to the franchisor as a contribution to the franchise system’s advertising fund(s). The fund is typically established to pay for the creation and placement of advertising. It is used to offset the franchisor’s administrative costs relating to “retail/brand” advertising. Payments are typically calculated as a percentage of gross sales.
Approved Advertising Materials: Materials provided by the franchisor for the franchisee’s use in their local market, or materials created by the franchisee, which the franchisor has approved for use.
Approved Products: Specified products that a franchisee must buy for use in their business. Franchisor may also specify an authorized supplier (see authorized supplier definition below). Generally established to control the quality of the products used or sold by the franchisee in conducting their business.
Approved Site: A location that the franchisor determines will satisfactorily meet its criteria. Site approval by franchisor is generally not an indication of the sales potential or success of the location.
Area Developer (AD)/Area Representative (AR): Similar in some ways to a master franchise. An AD/AR purchases a territory and as franchisees open in their territory, the AD/AR receives a percentage of the new franchisee franchise fee and a percent of ongoing royalty fees. This is in exchange for services provided by the AD/AR…for example, training, supervision, human resource functions and other types of support.
Area Franchisee: A franchisee who has acquired exclusive rights to open franchise units within a defined territory, usually on a schedule or timeline set at the time of signing an agreement.
Authorized/Designated Supplier: A supplier of products and/or services used in the operation of the franchise that has been approved by the franchisor to sell to franchisees. May be the franchisor or an affiliate company.
Capital Required: The initial investment or required amount of investment necessary to open and operate the franchise
Churning: The turnover of ownership of a franchisee from one franchisee to another, from a franchisee to the corporate entity.
Company/Corporate Locations: A company-owned location as opposed to by a franchisee.
Copyright: The right to use and license others to use intellectual property, such as system manuals or other published materials.
Continuous Training: Ongoing training provided by franchisors to its franchisees, unit management, and staff, subsequent to the initial training provided.
Conversion: The “rebranding” and modification of an existing business into a franchise unit of a different company. Some franchisors prefer conversions to new businesses as a way to reduce costs and ensure the franchise owner has the appropriate skills to run the business.
Day-to-Day Management: As an independent owner, the franchisee is obligated to manage the day-to-day affairs of their business to meet the franchisor’s brand standards.
Default: The failure of either party to meet the terms of the agreement. In franchising certain defaults are enumerated and some can be cured in a defined period, while others may not be curable.
Discovery Days: A term commonly used to refer to the time when a franchisor invites a prospective franchisee (sometimes several at once) to the corporate office to meet the staff and learn more about the company. This is often one of the final steps before the prospective franchisee makes a final decision on investing in the franchise.
Distributorship: The right granted by a manufacturer or wholesaler to sell their products.
Feasibility Study: An examination of the potential of a company to franchise, or of the potential success of a unit within a specific market or specific location.
Federal Trade Commission (FTC): The agency of the U.S. Government, which regulates franchising under FTC Rule 436.
Field Consultant: Employee or contract worker of the franchisor whose responsibility it is to support and assist franchisees in the field, at their locations. Usually, field consultants are assigned a geographic region, but this may vary based on size of the franchise system, business model or other factors.
Field Representative: Typically an employee of the franchisor responsible for ensuring compliance by the franchisee with system standards. They are also responsible for providing assistance to franchisees in the operation of their businesses.
Financial Performance Representation (FPR): Formerly known as an Earnings Claim, an FPR is the Item 19 in the FDD, representation of unit performance by a franchisor.
Footprint: Layout of a location including placement of all furniture, fixtures, and equipment.
Franchise: A relationship, as defined by the FTC and various states, which typically includes three basic elements: (1) the granting of the right to use the systems mark, (2) substantial assistance or control provided by the franchisor to the franchisee, (3) the payment of a fee (in excess of $500) during a period of time six months before or six months following the commencement of the relationship.
Franchise Agreement: The agreement between the franchisor and franchisee, which specifies the obligations of each party to the other during and following the franchise relationship.
Franchise Attorney: A lawyer specializing in, or with significant knowledge of, the laws, regulations and customs governing franchising.
Franchise Candidate/Prospect: A person who has expressed interest in continuing the approval process by completing and submitting the franchise application, and whose application has been preliminarily approved by the approval committee or the development director.
Franchise Consultant: A business specialist with significant knowledge of the design, development, and operation of franchising and the underlying franchise relationship. Not to be confused with a Broker, who is a sales agent for the franchisor (see broker definition above). Most work with many franchise brands concurrently, and will match a prospective franchisee with the brands that are the best fit based on a set of criteria.
Franchise Development: The “sales” process of adding new franchisees to a franchise company. Staffs with “development” in their title are typically charged with bringing new franchisees on board; however, the most successful franchise brands generally treat this process less as a sale and more as a job interview. They should be looking for the right fit for them, and you as a potential franchisee.
Franchise Disclosure Document: Also known as the FDD. Formerly known as the Uniform Franchise Offering Circular (UFOC). The format of the FDD is specified by the FTC and NASAA (Federal and State regulators) and provides information about the franchisor, the obligations of the franchisor and the franchisee, fees, start-up costs, and other required information about the franchise system. It includes a listing of current and former franchisees. In addition to the disclosure portion of the FDD, the document will contain the franchise and other agreements and exhibits. It does not typically include unit earnings information.
Franchise Expo: Event in which prospective franchisees can meet with a number of franchise companies in person to discuss the opportunities they offer. Among others, The Great American Franchise Expo (TGAF, An American Expo Company) operates numerous franchise expos around the country. These expos are open to the public and include franchisors, legal, funding, business planning, training and educational seminars. For free tickets, contact us at [email protected]
Franchisee: The person or company granted the rights (license) to do business under the trademark and trade name by the franchisor.
Franchise Fee: The initial fee paid by the franchisee to the franchisor, usually upon signing the franchise agreement, as consideration for joining the system. Typically, a flat payment as opposed to a percentage royalty, and is used to offset a franchisor’s franchisee start-up costs, marketing for franchisees, and other corporate expenses.
Franchisee in Good Standing: Franchisee operating their location and business in material compliance with franchisors operating standards and is current with all payments owed to franchisor and key suppliers.
Franchisee Satisfaction Index (FSI): A measurement of the satisfaction of franchise owners within a brand. FSI was created by Franchise Business Review in 2007 and is represented on a 100-point scale.
Franchising: Franchising occurs when a business (the franchisor) licenses its trade name (the brand) and its operating methods (its system of doing business) to a person or group (the franchisee) that agrees to operate according to the terms of a contract (the franchise agreement). The franchisor provides the franchisee with support and, in some cases, exercises some control over the way the franchisee operates under the brand. In exchange, the franchisee usually pays the franchisor an initial fee (called a franchise fee) and a continuing fee (known as a royalty) for the use of the trade name and operating methods. Franchising describes the system of delivery, not the specific product or service associated with the delivery as in Product or Trademark Franchising.
Franchisor: The name given to a company that offers a franchise opportunity as a means of growth. Sometimes referred to as “franchiser.” Franchisor: A person or company, which grants the license to a third party for the conducting of a business under their marks.
Gross Sales: When used in franchising, generally the total sales of the business before the collection of any sales taxes and after specified deductions. Generally used as the basis for percentage royalty calculations.
Initial Investment: The total estimated cost for establishing the business, including the franchise fee, initial fixed assets and leasehold improvements, inventory, deposits, other fees and costs, and the working capital required during the initial start-up period (three months). Initial Investment: The estimated total investment a franchisee will need to get the franchise business up and running. Usually represented as a range showing a low-end and high-end, the initial investment can be found in Item 7 of a franchisor’s Franchise Disclosure Document. Cost elements will include the franchisee fee, equipment, property lease, and other ramp-up costs.
International Franchise Association (IFA): The largest and best-known organization representing the franchising industry. The IFA works to provide resources to franchisors, franchisees, and suppliers to franchise companies and is active in the political space for franchise and small business interest.
Item 19: The section of the Franchise Disclosure Document that a franchisor may use to disclose earnings claims of existing franchise owners and corporate locations. Note that this data is not a mandatory inclusion in the FDD, and the data provided may represent only a specific group of franchisees and/or corporate-owned franchises. Always read the fine print to understand where the numbers come from, especially if comparing Item 19 claims from several brands.
Key Supplier or Vendor: Supplier with whom franchisor has negotiated pricing or product availability and whose products or services are integral parts of the franchise system.
Lead: An inquiry that is prequalified after the initial interview with a member of the franchisor’s development staff as meeting the minimum criteria to become a franchisee, and who is invited to submit a franchise application.
Liquid Capital: A sum of cash and other assets that can be easily converted to cash. Franchisors will require a specific minimum amount of available liquid capital from prospective franchisees.
Location: The site of the franchised or company-owned operation.
Manuals: The reference literature published by the franchisor that specifies the method of operating the business under the mark. The operations manual(s) enables the franchisor to alter and evolve the business.
Master Franchisee: A franchise relationship which is granted for the development of a specified area, and which allows the master franchisee to sub-franchise to other franchisees within the specified territory. A Master Franchisee may but doesn’t necessarily own one or more franchises in their allotted territory.
Multi-Concept Franchisee: A franchisee who owns units of multiple different franchise brands. Some franchise brands prohibit multi-concept franchising for their franchisees, while others may actively seek franchisees that already own other brands.
Multi-Unit Franchisee: A franchisee who agrees to open two or more locations, generally in a defined market over an agreed upon period of time.
Net Worth: Calculation of one’s total value (total assets minus total liabilities). Many franchise brands require a minimum net worth in addition to a minimum liquid capital for prospective franchisees.
Operations: The processes, procedures, and strategies employed by the business to provide the product and/or services to its customers.
Operating Principal: A single individual authorized by a franchise owner to make day-to- day decisions on behalf of the franchisee. This person is the operating principal and is usually the person with whom the franchisor consults in regarding the operation and conduct of the franchise.
Product and Trade Name Franchising: The licensing of a franchisee/dealer to sell or distribute a specific product using the franchisor’s trademark, trade name, and logo (automobile or truck dealerships, farm equipment, mobile homes, gasoline service stations, automobile accessories, soda, beer, bottling). Describes the specific product or service associated with the delivery, not the system of delivery as with Business Format Franchising.
Protected or Exclusive Territory: Protection or exclusivity granted to a franchisee by the franchisor against the opening of company, franchisee, or other locations within the territory assigned to the franchisee.
Quality Standards: The standards specified by the franchisor for the operation of the business. Quality standards are specified in the operations manuals, and quality franchise systems tightly control their standards for the benefit of the franchise system and its franchisees.
Registration: A requirement to submit the franchisor’s disclosure document prior to the approval to offer franchises within some states. There is no requirement to register a franchise at the Federal level. Registration is not an indication of state sanction of the value of the franchise offering.
Registration States: The 14 states that require franchisors to submit their FDD for approval prior to offering franchises. The registration states are members of NASAA.
Renewal: Extension of the original franchise agreement whereby the franchisee retains ownership of the franchise business for a new term.
Retro franchising or Refranchising: When existing locations that may or may not have ever been franchised, and which are currently operated by the franchisor, are offered for sale to prospects.
Royalty Fee: Typically a percentage of gross sales paid by the franchisee to the franchisor on a regular basis. May also be a fixed or other fee basis.
Service Mark: A mark used to identify the services of one company as distinguished from the services of another. Service Marks are afforded similar protection to registered marks under the law.
Single-Unit Franchisee: Franchisee who owns and operates a single location.
Start-Up Costs (Initial Investment): The initial investment that the franchisee will make in becoming a franchisee. It is also known as an Item 7 disclosure in the FDD. Generally includes the franchise fee, the cost of fixed assets, leasehold improvements, inventory, deposits, other fees and costs, and working capital required during the start-up period.
Successor Agreement: Franchisee’s ability to continue in the business for additional terms following a successful completion of their initial term.
Supplier/Vendor: A business providing a service or product to another business. Franchisors often establish “preferred” supplier/vendor relationships wherein individual franchises receive negotiated discount pricing.
Territory: A designated area that comprises a franchise “unit,” typically used for service-based or mobile franchise business models. Many franchisors provide exclusive territories to prevent conflict between franchisees.
Transfer: Ownership of a franchise business is moved from one party to another.
Trademark: The mark, name, and logo which identifies the franchisor and which is licensed by the franchisor for use by the franchisee.
Turnkey: A term used to describe a location, which is provided to a franchisee fully equipped and ready to operate.
Uniform Franchise Offering Circular: A Uniform Franchise Offering Circular (UFOC) is the original name of what is now called the FDD (Franchise Disclosure Document).
Validation: Part of “due diligence” when buying a franchise. Calling to speak with existing franchise owners in an attempt to validate the virtues of the franchise opportunity as explained by the franchisor. Typically, the prospective franchisee will contact several franchisees from the list provided in the company’s FDD.