Franchise Foundations, APC - Kevin B. Murphy, B.S., M.B.A., J.D.

The most successful franchise system in the world, McDonalds captures the minds and imaginations of a big sllice of humanity. How much does a McDonalds franchise cost? What kind of profits does a McDonalds generate? How does one buy a McDonalds franchise? This article provides the answers.

Franchise operations manuals may seem daunting, especially for a company that has never written an operations manual before. Bewildered by the new business of franchising, with its legal requirements, franchise disclosure documents, operations manuals, training programs, etc., many companies delegate responsibility for writing their manual to a high-priced franchise consultant.

For the last twenty-eight plus years, as a franchise attorney, author, instructor and recognized franchise expert, I’ve helped firms enter the franchise industry – each hoping to become the next “McDonalds” of their respective industries. Along the way, I've met and worked with an interesting group of entrepreneurial founders.

You’re excited about buying a franchise and are ready to trade your briefcase for an ice cream scoop. The company’s told you it’s the opportunity of a lifetime, given an impressive tour of their headquarters and taken you to a couple of their operating outlets. When the day ended, they presented their FDD or Franchise Disclosure Document. The representative told you to read it and the contract couldn’t be signed for at least 14 days, Who do you use and what’s it going to cost?

Buying a franchise represents a different approach to starting a business, a dream shared by millions. Having the independence that being your own boss brings, the security that no one can fire you, enjoying a good income - and for the most successful - the accumulation of wealth and prosperity. Unfortunately, the cards are stacked against a new small business making it big - or making it at all. An endless stream of problems makes competition from large, sophisticated chains too intense.

Franchise Disclosure Documents are a good concept in theory. Unfortunately, reality plays a more important role and reveals an entirely different picture. Here are some of my observations, based on twenty-eight plus years of experience in the franchise industry as a franchise attorney, franchise expert and former franchise owner. During this time, I’ve drafted, reviewed and negotiated over 500 Franchise Disclosure Documents.

A company planning to franchise a business must realize it is entering a new business, offering an entirely different service (training & support) to entirely new customers (business owner-operators). This new business requires different skills, abilities and expertise. In the new business of franchising, it is critical to develop effective evaluation, documentation, training and consulting skills.

Evaluating franchise attorneys and evaluating franchise consultants can seem a daunting task. But the firm a company selects to assist its entry into franchising (or refining existing franchise efforts) will have profound consequences. While you can always ask for a list of "references" (and when is anyone ever dumb enough to provide a bad reference?) there are more objective criteria that are not dependent on selectively disseminated information.

The starting point in the franchising vs. licensing a business analysis is to consider the legal aspects, then the business aspects. In considering the legal aspects, begin with the following premise that applies to both options. If you put someone into business (or allow them to use your business name/mark) this transaction will normally be a regulated activity, subject to substantial penalties for noncompliance.