What Do Most Franchise Businesses Have in Common?
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Mary Martin
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Mary Martin has been a legal writer and editor for over 20 years, responsible for ensuring that content is straightforward, correct, and helpful for the consumer. In addition, she worked on writing monthly newsletter columns for media, lawyers, and consumers. Ms. Martin also has experience with internal staff and HR operations. Mary was employed for almost 30 years by the nationwide legal publi...
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UPDATED: Aug 28, 2024
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UPDATED: Aug 28, 2024
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
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There are many commonalities between one franchise business and another. One basic commonality is the method by which the franchise owners and buyers do business. The owner of the franchise business, or the franchisor, sells the trademark rights to the franchisee, who opens up a replica of the owner’s company. The business is based upon a common method or approach that relies on a combination of techniques or products plus the frranchiser’s special trademark, service mark, trade name, logotype, advertising, or other symbol that designates the franchiser.
Franchise Business Commonalities
Another commonality between all franchises is the Franchise Disclosure Document. The Federal Trade Commission (FTC) requires that the owner of a franchise business provide a disclosure document to a franchisee at least 14 days before finalizing the deal or signing the contract. As required by the FTC, each Franchise Disclosure Document will include the same basic categories of information.
These categories include license and permit requirements, the business backgrounds of the owner or management team, a list of other current or former franchises, any bankruptcy or litigation history the franchise has been subject to, all franchise fees, and all trademark or copyright information. The franchisor will most likely require the franchisee to buy certain types of insurance for the franchise as well, which also must be listed in the Franchise Disclosure Document.
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Commonalities Related to Fees
The specific franchise fees and royalties listed in the Financial Disclosure Document will also have some commonalities. In all franchise sales, the franchisee will have to make several types of payments, some upfront and some ongoing. In virtually every franchise business deal, the franchisee will have to pay the franchisor for the right to use the franchisor’s trademark, as well as the cost of training and other expenses. These expenses may be included in a one-time, upfront payment. The franchisor will also collect ongoing royalties from the franchisee as part of the business deal.
While franchises share a similar business structure and basic paperwork, there are also many differences between individual franchise business models. For more information, or for guidance on investing in a franchise business, contact an experienced franchise attorney.
Case Studies: Commonalities in Franchise Businesses
Case Study 1: Replica Burgers Franchise
John Smith is considering investing in the Replica Burgers franchise. The franchise model involves opening a replica of the owner’s company, Replica Burgers. This case highlights the importance of trademark rights and the successful replication of the owner’s business model.
Case Study 2: FreshFit Gym Franchise Disclosure
Sarah Thompson is exploring the possibility of joining the FreshFit Gym franchise. As part of the franchise process, the franchisor is required by the Federal Trade Commission (FTC) to provide Sarah with a Franchise Disclosure Document (FDD) at least 14 days before finalizing the deal.
This case study explores the mandatory information categories within the FDD, including license and permit requirements, the business background of FreshFit Gym’s management team, franchise fees, and insurance requirements.
Case Study 3: Gourmet Pizza Franchise Financial Obligations
Michael Johnson is interested in joining the Gourmet Pizza franchise system. This case study examines the financial obligations involved in the franchise agreement. It emphasizes the upfront and ongoing payments Michael must make, including the payment for the right to use Gourmet Pizza’s trademark, training costs, and ongoing royalties.
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Mary Martin
Published Legal Expert
Mary Martin has been a legal writer and editor for over 20 years, responsible for ensuring that content is straightforward, correct, and helpful for the consumer. In addition, she worked on writing monthly newsletter columns for media, lawyers, and consumers. Ms. Martin also has experience with internal staff and HR operations. Mary was employed for almost 30 years by the nationwide legal publi...
Published Legal Expert
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.