Attorney Keith Gross was choses to participate as an expert panelist recently for an article about the costs associated with franchising a business concept. Read the full article here: 1851 Franchise Magazine
“Franchising can provide a pathway for an entrepreneur to expand the size of their business while also affording others the opportunity of business ownership. However, making the leap from an independent business to a franchise model requires several considerations, chief of which to the would-be franchisor may be the question of, “How much will this cost?”
The answer to that question is not a simple one. There is no flat rate or crystal ball to reveal the exact amount that must be spent to get a franchise off the ground – much less to invest properly to ensure its success.
“When people call up and ask, ‘How much is it going to cost me to franchise my concept,’ I tell them that I can give them the legal costs – but there is a lot involved. The first question is what type of franchise model are you going to have? If it’s a single unit model with just a franchise agreement and related agreements, then that will cost one thing – whereas if you are planning to do a master franchise or an area development agreement, those can cost more. You need to ask that question first up front,” said Patrick Maslyn, a franchise lawyer.
Masyln added that oftentimes brands don’t have their trademarks protected, so that will require additional cost. He also noted that many franchisors need to determine if they have the skills required to effectively put together a manual for the execution of a franchise business. If not, then they will need to factor in costs to pay an expert to handle.
“An FDD [franchise disclosure document] is often more than 200 pages and an FA [Franchise Agreement] is generally 50-80 pages. These documents can take weeks to adequately draft and require the attorney to gain a full understanding of the business, its risks and its profit centers to ensure that the franchisor’s interests are adequately protected by the documents,” said Attorney Keith Gross with Gross Law Group, P.A.
Gross offers services tied to other ongoing costs associated with keeping a newly launched franchise running, such as legal expenses and costs tied to modifying documents and preparing closing packages as a franchisor begins selling units. He added that costs associated with advertising the franchise opportunity will be key to factor in too, as well as staffing needs to support a growing system.
“Franchisors need to do a lot of advertising to sell units as well as the standard advertising necessary to get clients for their franchisees,” said Gross. “Depending on the concept, a franchisor will likely need to maintain certain franchisor level staff positions to fulfill the franchisors contractual obligations to the franchisees.””
These are some of the many topics that you should discuss with your attorney prior to deciding how to franchise your business. Franchising can be an excellent means of growing your business by providing greater expansion of your concept that perhaps you could produce on your own. To do franchising properly however, you should be sure to start out with well drafted documents. While there are many providers of low-cost documents out there, these “franchise-in-a-box” providers are often consultants rather than attorneys and they may be using outdated documents that fail to capture the nuances of your concept. Before spending a lot of time and money on any business venture, it makes sense to get the advice of a skilled lawyer to ensure that you’re going down the right path and to understand what you should be doing to protect your current and future interests. A good business lawyer will make you far more than they’ll cost you and the adage “an ounce of prevention is better than a pound of cure” couldn’t be more accurate in business law. If you wait until you’ve got a conflict, you’re already in a difficult position. If you plan well in advance, the conflict may be entirely avoided.
Sometimes situations require litigation and our firm is skilled at handling litigation matters as required. However, a well planned business relationship often makes litigation unnecessary. Contact us to discuss how we can help position your business for success.