Table of Contents
This edition of this book is dedicated to my Editorial Director, Jere Calmes, who has provided me with guidance that resulted in not only a timely updated version of the book, but added new franchising perspectives based on my past experiences fo rthe readers benefit.
Foreword
Sitting in a hotel room in Anaheim, California after having flown in from Sydney, Australia, my business partner and I made a decision that I believe went a long way in securing our companys future in North America.
We established our company Granite Transportations, in Australia over the previous five years. Our decision to franchise had proven to be correct with over 35 successful franchises and growing. To do the same in the United States was going to be a huge leap from what we had already achieved. With a different legal system, company requirements, and a myriad of important details to deal with, we needed to make the right decisions from the start, or things could get very expensive or possibly terminal. Enter, the Franchise Bible. We were on the first step of what we hoped would be a challenging, exhilarating, and successful journey.
Once we made the decision to go for it, we called Erv Keup. Nothing ventured nothing gained, we thought. Erv answered the phone in what I came to realize was his own unique style. To say the least, he was surprised to hear an Australian accent asking if he would be prepared to advise us on franchising our company in North America. As luck would have it he had been to Australia just after World War II and had good memories of the place. He suggested we meet for breakfast at the Sutton Plaza Hotel in Orange County. I put the phone down and, slightly shocked, realized I had made a wonderful first step.
Breakfast the next morning was the start of an excellent business relationship, a firm friendship, and, from my point of view, a great respect for a man who really knows his stuff. In the Franchise Bible, Erv is able to write with authority from both sides of the equation, the potential franchisee and potential franchisor.
As a franchisee, this book will give you a window into the obligations and requirements your franchisor must undertake to be in a position to offer you a franchise. This will be of great benefit as you begin doing your homework to learn about potential franchisors youre considering. It is difficult to do the homework without the right textbook. I can assure you that reading this book will give you the information you need to make the right decisions.
As someone who is considering franchising their business I feel the Franchise Bible is the definitive source for both making an informed decision about whether your business has franchise potential and if so, how to do it. As you peruse the contents of this book, youll see chapters are based on answering questions that you would be asking yourself, plus many more that you have never thought of.
In my opinion its all here. Ive read many books on franchising but only this book could truly be called the Franchise Bible.
Robert Smith
Founder and past President
Rocksolid Granit (USA) Inc./
Granite Transformations
Whats New in This Edition? A Note from the Author
The sixth edition of Franchise Bible has been dramatically revised to include the final amended rule changes announced in January 2007 by the Federal Trade Commission (FTC) to its original Franchise Rule promulgated on December 21, 1978. This 2007 Rule amendment began in 1995 with a regulatory review of the original 1978 Rule. A Notice of Amended Rule Making (Franchise NPR) was published by the Commission in October 1999. A SAFF report was issued in August 2004. The final amended Rule was adopted in January 2007 with a pre-effective date of July 1, 2007 and a mandatory date of July 2008.
This amended Rule disclosure has requirements that are founded on the UFOC Guidelines developed in 1999 by the North American Securities Administrators Association (NASAA) representing the 15 states with franchise registration requirements.
Chapter 2, Learning About Franchise Documents, features illustrations of Uniform Franchise Offering Circulars (UFOCs) that meet the original Rules requirements and that may be in use until July 1, 2008 when following the amended Rule is mandatory. It is believed that most franchisors that have registered under the original rule will continue to use their existing UFOC until July 1, 2008. However, the required new changes effective July 1, 2008 are editorialized into Chapter 2 and Appendix H, entitled Amendments to the Disclosure Document, has been added to incorporate the new FTC instructions.
The amended FTC Rule (part 436) changes the title from UFOC Guidelines to Disclosure Requirements and Prohibitions Concerning Franchising and eliminated coverage of business opportunity offerings for the purpose of establishing separate trade regulation for such ventures.
In the 1970s and 1980s, franchising was predominately seen in the areas of restaurants, retail stores in non-food products, and hotels and motels. The recessionary period in the late 1980s and early 1990s, however, caused franchisors and franchisees alike to turn to businesses involving the maintenance, reconstruction, restoration, preservation, and servicing of major consumer productsbig-ticket items like automobiles, homes, furnishings, and major appliances. In addition, the 1990s saw a marked rise in the number of relatively low-cost franchises catering to the educational, business, and social needs of Americansfranchises that require a higher degree of expertise in the franchisee.
The new franchisors of the 2000s are and will continue to be well-read entrepreneurs in successful home improvement product and installation sales as well as diet weight loss and other health-oriented center service businesses.
My personal experiences with registering franchisors over the past few years, which witnessed the drastic rise and fall and the rise again of the stock market, have confirmed in my mind that the new franchisors of the 2000s are and will continue to be well-read entrepreneurs in successful home improvement product and installation sales as well as diet weight loss and other health-oriented center service businesses who have not only survived this volatile period but who are making a profit and wish to expand their businesses through available franchise marketing methods. They will be choosing franchisees that have the potential management skills and motivation necessary to successfully carry out their expansion process. Nationwide layoffs of middle- and upper-management personnel will supply a more highly educated, more experienced pool of potential franchisees.
The 1990s saw a revolt by some franchisees of major franchisors concerning what they feel are unfair and unconscionable terms in their franchise agreements, many of which were signed in the 1980s. This has culminated not only in franchisees forming their own associations, but also in the International Franchise Association (IFA), formerly an association primarily of franchisors, now counting over 25,000 franchisees as new members. Iowa was the first state to enact legislation protecting territorial rights among other franchisees, which became effective on July 1, 1992.
Finally, throughout the book (including here) youll find important ideas from the text pulled out into boxes in the margin. Ive done this to reinforce these ideas. I have also sometimes included things you should do when considering and implementing a franchise business. Next to these youll find the marginal reminder, Make this part of your To Do List. Look for those.
