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Processes and Technicalities
Of course, everyone’s favourite part of any business venture is bureaucracy and red tape! Unfortunately, these things are a necessary part of life, especially in business. You’re going to have to deal with the legalities of franchising sooner or later; you may as well address them sooner. That will leave you free to deal with the important stuff without worrying about liabilities.
What is a UFOC Document?
If you’ve been researching franchising on the Internet or speaking to business associates, you may have heard buzz about something called a UFOC document. The UFOC (or Uniform Franchise Offering Circular) is a detailed, carefully mandated document describing the franchise in detail, providing audited financial statements, and demonstrating that a franchisee is ready and able to take on the franchise. In other words, it’s a pain in the neck.
Now for the good news: entrepreneurs in the UK do not require a UFOC document to franchise their businesses. Take a deep breath, give a sigh of relief, and never worry about this silly thing again!
The Process
Just because you get to skip the UFOC document doesn’t mean you’re off the hook, though. There’s a very distinct process you must follow when you’re getting ready to franchise your business. This process is:
· Sales Prospectus
· Registration of trademarks and logos
· Nondisclosure document
· Viewing franchise operation
· Signing franchise agreement
· Transfer of Cash
· Training Course
· Operation Manual
· Staff Manual
· Ongoing Training and Support
Some of these will be discussed in greater detail later in this book. For now, we’re going to start with the initial technical processes: the sales prospectus, nondisclosure document, and viewing of franchise operations.
The Sales Prospectus
The sales prospectus is a key document; in fact, you might say it is the key document. You should not rush this step: a good sales prospectus can take up to two months to prepare.
The sales prospectus is essentially a document explaining the details of your business. Some of the things it should include are:
· a brief history of your business
· details of your product and services
· your current market and operations
· current and future market trends
· opportunities for selling and developing your product
· details of your business’s current financial position
This is an essential document. In addition to including the above information, be sure that you:
· Don’t try to prepare the sales prospectus alone. Consult advisors, others in your company, successful franchisors, sample sales prospects, and anything else you can get your hands on.
· Ensure the document is well written and grammatically correct. If you have to hire someone to proofread the document, do it. This is your professional piece, the thing that encourages people to learn more about your company. If it’s laced with spelling errors and incomprehensible grammar, you’ll lose franchisees before they get to your product information.
· Keep things positive. Don’t lie, but don’t emphasise negatives, either. Remember, you’re trying to sell yourself and your business here; think of it as an advertisement more than a detailed history of your company.
The Nondisclosure Document
By its very definition, franchising involves releasing information about your company to outside sources. This may be information you don’t want broadcasted to the world at large: private data, product information, or financial trends. Basically, almost every detail of your operation will be exposed to potential franchisees. This is where the nondisclosure document comes in. Before you provide anyone with information about your company, you should have a nondisclosure document prepared and ready to go.
Don’t worry about offending potential buyers: nondisclosure documents are an expected part of the business world. You won’t do yourself any favors by skipping this critical step. Feel free to compose the nondisclosure agreement on your own, but it’s in your best interests to have your lawyer look it over before finalising it. Unless you’re extremely familiar with business law, you want a professional to make sure you’ve adequately covered yourself.
When creating the nondisclosure agreement, consider what information you want to protect and how you want it handled. The more specific you make the document, the clearer the result. However, the more specific you make the document, the easier it is to find loopholes. The key is to find a balance between the general and the specific, something that protects critical information without going overboard.
You also must include the consequences of releasing private information to the public. Generally there are two routes to choose from: a liquidated damages provision, where you spell out a specific amount to be paid if the nondisclosure document is violated, or suing for actual damages, where you go to court and argue for the amount of loss the disclosure cost you. In general, a liquidated damages provision will probably be adequate: this is another situation where you should consult your lawyer (and more on that later!).
The nondisclosure document does not have to be (and should not be) a complicated procedure. Your goal is to protect yourself, your company, and franchisees from the irresponsible use of information. You may think this won’t be an issue -- and it probably won’t -- but as in all cases with business, it’s best to have yourself covered.
Viewing Franchise Operation
Before you even consider writing a franchise agreement, it’s essential that you have an understanding of how franchises work. With that in mind, it’s well worth your time to inspect other successful franchise models. Get an understanding of how they operate and what makes them successful, and use them as a model for your own franchise.
Putting together a franchise is a time consuming process. Remember, your franchise agreement should cover you for years to come, so it’s well worth doing your homework in advance and not lamenting later on.
Summary
Before you do anything else, you must construct a sales prospectus and a nondisclosure agreement to protect yourself and your business. From there, you’re going to consider successful franchise models. These three steps together will give you the necessary foundation to build your franchise. From this point on, things really get fun.
How
To Franchise Your Business Info Guide
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