There is a very common misunderstanding of the term “Standard” when it comes to written contracts. All too often individuals mistake the term “Standard” to signify something that has been approved and authorized by “neutral” authority and/or is deemed to be fair and equitable to both parties to the contract. Or they mistake the term”Standard” to signify something that is non-negotiable.
In most instances, none of these statements is accurate.
When asked to sign a “Standard” form, you need to take the time to: (1) understand who actually drafted the contract; (2) recognize the probable bias of the party presenting the contract; (3) have an understanding of the essential terms that should be included in this specific type of contract; (4) be able to discern what has been intentionally left out of the contract presented; (5) know what you need to have in the contract to protect your interests and achieve your goals; and (6) recognize which provisions are not favorable to your position.
One example to consider is the “Standard” form used in retail leasing. In the majority of situations, the landlord wrote the lease; the landlord only included provisions favorable to it; no terms favorable to the tenant were likely included; the landlord left out many provisions that it would not like (i.e., there is little likelihood of seeing a meaningful Landlord Default provision); no provision is included that would allow the tenant to withhold rent or terminate the lease; no provisions are included to provide use exclusivity or protections from competition; and almost all provisions are written simply to favor the landlord without mutual protections applicable to the tenant. Signing a “Standard” lease such as this will leave you in a very subservient position, with little or no recourse from arbitrary actions by the landlord. The term “Standard” here means that these are the terms the landlord wants for uniformity within its business operations, not any “Standard” of fairness to any other parties involved.
Another type is the “Standard” FAR/BAR (Florida Association of Realtors and The Florida Bar) form for residential property sales. (1) Generated by the joint efforts of the two associations, these forms represent the interests of three distinct parties: the Seller, the Buyer and, of course, the Broker. And (2) now, notice that NO ONE represented the interests of either the Buyer or the Seller when this “Standard” contract was generated. So, guess what? The only party adequately protected by that “Standard” form is the Broker. (3) Every contractual situation is unique, but this “Standard” contract form was developed in part as a compromise of the competing interests of the Seller and the Buyer, NEITHER of whom is adequately protected. (4) This “Standard” form leaves several blank lines at the end for the parties to add additional provisions. But do you know what is missing from the “Standard” form that needs to be added? And which of the many “Standard” provisions need to be modified, to reflect the business deal each party believes they are getting?
When you see or hear the term “Standard” form, a red flag should be raised. Someone else’s “Standard” is unlikely to be fair to you. Hire an attorney to assist in making a critical evaluation of the proposed transaction and provide you with the input and support needed to protect your interests. Although signing a “Standard” form may appear to be a “short-cut” which saves time and money for all parties, it is more than likely that it will “short-change” YOU.
Thursday, August 2, 2012
Wednesday, March 7, 2012
PROPERTY INSPECTION
GENERAL CHECKLIST FOR PHYSICAL INSPECTIONS
Whenever dealing with leasing or buying land, a building or space in a building, it is important to do your homework regarding the physical condition of the property. Here is a preliminary list of items I recommend my clients investigate.
1. Utility inspection as to operating conditions, capacity, code compliance for particular uses, and costs of upgrade and repair.
2. Mechanical systems (HVAC, plumbing, etc) status regarding operating condition, life expectancy, code compliance, adequacy and potential costs of replacement and repairs.
3. Presence of environmental/health contaminants (mold, asbestos, etc.), and potential need for invasive testing and costs for testing.
4. Evidence of historical uses and potential need for additional investigation.
5. General repairs and deferred maintenance issues (water leaks, standing water, corrosion, staining, etc), and costs of upgrades and repairs.
6. ADA and other code compliance issues related to particular uses, and costs of upgrades and repairs.
7. Condition of interior and exterior surfaces, evidence of condition or maintenance issues, and costs of upgrades and repairs.
8. Fire safety (sprinkler system, alarms, and wall and roof penetrations,) and costs of upgrades and repairs.
9. Roof and parking surface conditions, and costs of upgrades and repairs.
10. Termite and other infestations, and costs of upgrades and repairs.
11. Utility usage history (12 months) for water, gas and electricity should be reviewed for building envelope integrity and overall energy efficiency; results could prompt the need for further investigations.
Whenever dealing with leasing or buying land, a building or space in a building, it is important to do your homework regarding the physical condition of the property. Here is a preliminary list of items I recommend my clients investigate.
1. Utility inspection as to operating conditions, capacity, code compliance for particular uses, and costs of upgrade and repair.
2. Mechanical systems (HVAC, plumbing, etc) status regarding operating condition, life expectancy, code compliance, adequacy and potential costs of replacement and repairs.
3. Presence of environmental/health contaminants (mold, asbestos, etc.), and potential need for invasive testing and costs for testing.
4. Evidence of historical uses and potential need for additional investigation.
5. General repairs and deferred maintenance issues (water leaks, standing water, corrosion, staining, etc), and costs of upgrades and repairs.
6. ADA and other code compliance issues related to particular uses, and costs of upgrades and repairs.
7. Condition of interior and exterior surfaces, evidence of condition or maintenance issues, and costs of upgrades and repairs.
8. Fire safety (sprinkler system, alarms, and wall and roof penetrations,) and costs of upgrades and repairs.
9. Roof and parking surface conditions, and costs of upgrades and repairs.
10. Termite and other infestations, and costs of upgrades and repairs.
11. Utility usage history (12 months) for water, gas and electricity should be reviewed for building envelope integrity and overall energy efficiency; results could prompt the need for further investigations.
Friday, October 15, 2010
FRANCHSING: WHAT DOES IT COST?
What does it cost to franchise?
Not a week goes by that I don’t get a call from a successful business owner wanting to explore “franchising” their business. Typically, during this introductory call (for which there is no charge), the subject comes to a request for a ballpark figure of the costs to franchise. Obviously, that’s a difficult question to answer, when there is a myriad of issues and concerns to be addressed. Here are just a few of the items that I bring to the caller’s attention which are likely to cost money.
Business Plan
Do you have a strategy that is suited to expanding your business? A business plan based on a careful financial analysis of current operations, indicating that your business can be replicated (taught to others), and a well thought out plan for a franchise structure for your business (not the operation to be franchised), that will work as you have envisioned.
Demographics, Customer Bases, Locations, Business Partner Profiles
What are the factors that have made you a success? Before jumping into the franchise world, you need to really understand what has made you successful. Have you defined the demographics, both in terms of your customers and the potential franchisees (business partners) that can perform at the success level needed to replicate the business you have created?
Operating Manuals
Have you started to write manuals describing how your business functions on a day-to-day basis? Are they clear and easy to understand? Do you have business operations and policies written down so that they can be easily followed? If not, you will need to develop them. Your operating manuals are an essential tool the franchisee needs to execute the business in a profitable manner.
Experts
Aside from having a good manual writer (you will likely need an expert in the field to assist you), you need a CPA to prepare initial, and possibly audited, financial statements, and an experienced attorney well versed in franchise law (let’s think Godfrey Legal) to draft the franchise agreement and related documents, including the Franchise Disclosure Document.
Costs?
We’re just now getting there! None of the above comes for free. You can buy a Mercedes or a Hyundai. Think of these variables, add about 50%, and you are in the ballpark. Want some of my guesstimates? Please call me at 407-701-7530 for a free telephone interview.
B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
D/B/A GODFREY LEGAL
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
Not a week goes by that I don’t get a call from a successful business owner wanting to explore “franchising” their business. Typically, during this introductory call (for which there is no charge), the subject comes to a request for a ballpark figure of the costs to franchise. Obviously, that’s a difficult question to answer, when there is a myriad of issues and concerns to be addressed. Here are just a few of the items that I bring to the caller’s attention which are likely to cost money.
Business Plan
Do you have a strategy that is suited to expanding your business? A business plan based on a careful financial analysis of current operations, indicating that your business can be replicated (taught to others), and a well thought out plan for a franchise structure for your business (not the operation to be franchised), that will work as you have envisioned.
Demographics, Customer Bases, Locations, Business Partner Profiles
What are the factors that have made you a success? Before jumping into the franchise world, you need to really understand what has made you successful. Have you defined the demographics, both in terms of your customers and the potential franchisees (business partners) that can perform at the success level needed to replicate the business you have created?
Operating Manuals
Have you started to write manuals describing how your business functions on a day-to-day basis? Are they clear and easy to understand? Do you have business operations and policies written down so that they can be easily followed? If not, you will need to develop them. Your operating manuals are an essential tool the franchisee needs to execute the business in a profitable manner.
Experts
Aside from having a good manual writer (you will likely need an expert in the field to assist you), you need a CPA to prepare initial, and possibly audited, financial statements, and an experienced attorney well versed in franchise law (let’s think Godfrey Legal) to draft the franchise agreement and related documents, including the Franchise Disclosure Document.
Costs?
We’re just now getting there! None of the above comes for free. You can buy a Mercedes or a Hyundai. Think of these variables, add about 50%, and you are in the ballpark. Want some of my guesstimates? Please call me at 407-701-7530 for a free telephone interview.
B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
D/B/A GODFREY LEGAL
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
Saturday, April 24, 2010
ESTATE PLANNING PRIMER
ESTATE PLANNING PRIMER
One of the first things you need to know about estate planning, is there are a minimum of four (4) documents which need to be included: a Will, a Durable Power of Attorney, a Designation of Health Care Surrogate, and a Living Will. Preparing these documents in advance can save you and your loved ones much grief and expense which can occur during times of great emotional stress. Estate planning impacts the control of both your assets and your physical well-being while you are alive but either not able or not competent to make these important decisions.
Will
A Will is a legal document that details who is to receive the various portions of your assets upon your death, who is to act as the Executor to carry out terms set forth in your Will. If you have minor children, it can create a testamentary trust and name a guardian to care for them.
There are a number of unfortunate consequences which can occur if you do not have a Will. Florida statutory laws will dictate who will receive your assets. Your spouse and children might end up with less than you desired, or people you did not want to inherit could end up inheriting your assets. Your minor children could be placed with a guardian selected by the Courts, instead of a guardian of your choice. If a testamentary trust is not created for your minor children, they could inherit money before they are ready to manage it properly.
It is important to know that a will does NOT cover property which you own as a joint tenant with right of survivorship, insurance policies or retirement plans in which you have named a beneficiary, accounts for which you have designated a “Payable on Death” beneficiary, or address your burial plans.
Durable Power of Attorney
A Durable Power of Attorney (a “POA”) is a document that allows you to designate another person (a “Representative”) to perform certain actions for you in case you should become ill, incapacitated or otherwise unable to manage your affairs. The Representative can be your spouse, an adult child or someone else that you trust, who will be able to pay bills, manage your assets, buy and sell securities or real estate, or make other financial decisions on your behalf. The POA can be as broad or as limited as you determine. A POA can be revoked at anytime; however, without a POA, your spouse or other loved ones may be required to to go through expensive court procedures to have a guardian appointed in order to carry out necessary financial transactions.
Designation of Health Care Surrogate
A Designation of Health Care Surrogate is a document, similar to a POA, that authorizes a designated person (the “Surrogate”) to make medical decisions on your behalf if you are unable to make decisions for yourself. Typically, the Surrogate is your spouse, an adult child, or another trusted individual that is designated to act on your behalf to carry out what you've specified in your Living Will (see below) or otherwise follow your previously discussed instructions on handling your medical care. Having a Surrogate that knows your wishes can greatly ease the burden and uncertainty otherwise placed on your spouse and other loved ones if no Surrogate has been designated.
Living Will
A Living Will is also known as an Advance Medical Directive, a Health Care Directive, or a Physician's Directive (and you are probably asked every year by your doctor if you have one and requested to provide a copy for their records). Generally, the Living Will is a person’s written declaration of what life-sustaining medical treatments will be allowed or refused in the event a person should enter in a persistent vegetative state or develop a terminal condition. Many factors must be considered, including but not limited to: finances, health insurance, age, quality of life, the potential burden on loved ones, etc. A Living Will does not become effective unless you are incapacitated; until then you will be able to say what treatments you do or do not want. In most cases, a certification by your doctor and another doctor stating that you are either suffering from a terminal illness or permanently unconscious will be required before becoming effective.
Summary
Estate planning essentially is a way to organize your financial affairs so that when you are unable to manage them yourself, someone of your choice can step in and do it the way you prefer it to be done. It is strongly recommended that you have your estate planning documents drafted by a professional to ensure that they are prepared in accordance with state laws, and you and your loved ones do not end up with estate planning documents that will be contested and invalidated in the courts.
In addition, you should consider renting a safe deposit box at a bank. Into this box, you should put all of your important papers, including the originals of the foregoing documents. Those persons trying to take care of your business affairs will have one central place to go for all necessary documents. Of course, you should keep copies at home in a well known, but secure place, so that, absent immediate access to the safe deposit box, copies are readily available to your spouse, adult children, Executor, Representative, and Surrogate.
Please call me at 407-701-7530 for a free telephone interview. B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
One of the first things you need to know about estate planning, is there are a minimum of four (4) documents which need to be included: a Will, a Durable Power of Attorney, a Designation of Health Care Surrogate, and a Living Will. Preparing these documents in advance can save you and your loved ones much grief and expense which can occur during times of great emotional stress. Estate planning impacts the control of both your assets and your physical well-being while you are alive but either not able or not competent to make these important decisions.
Will
A Will is a legal document that details who is to receive the various portions of your assets upon your death, who is to act as the Executor to carry out terms set forth in your Will. If you have minor children, it can create a testamentary trust and name a guardian to care for them.
There are a number of unfortunate consequences which can occur if you do not have a Will. Florida statutory laws will dictate who will receive your assets. Your spouse and children might end up with less than you desired, or people you did not want to inherit could end up inheriting your assets. Your minor children could be placed with a guardian selected by the Courts, instead of a guardian of your choice. If a testamentary trust is not created for your minor children, they could inherit money before they are ready to manage it properly.
It is important to know that a will does NOT cover property which you own as a joint tenant with right of survivorship, insurance policies or retirement plans in which you have named a beneficiary, accounts for which you have designated a “Payable on Death” beneficiary, or address your burial plans.
Durable Power of Attorney
A Durable Power of Attorney (a “POA”) is a document that allows you to designate another person (a “Representative”) to perform certain actions for you in case you should become ill, incapacitated or otherwise unable to manage your affairs. The Representative can be your spouse, an adult child or someone else that you trust, who will be able to pay bills, manage your assets, buy and sell securities or real estate, or make other financial decisions on your behalf. The POA can be as broad or as limited as you determine. A POA can be revoked at anytime; however, without a POA, your spouse or other loved ones may be required to to go through expensive court procedures to have a guardian appointed in order to carry out necessary financial transactions.
Designation of Health Care Surrogate
A Designation of Health Care Surrogate is a document, similar to a POA, that authorizes a designated person (the “Surrogate”) to make medical decisions on your behalf if you are unable to make decisions for yourself. Typically, the Surrogate is your spouse, an adult child, or another trusted individual that is designated to act on your behalf to carry out what you've specified in your Living Will (see below) or otherwise follow your previously discussed instructions on handling your medical care. Having a Surrogate that knows your wishes can greatly ease the burden and uncertainty otherwise placed on your spouse and other loved ones if no Surrogate has been designated.
Living Will
A Living Will is also known as an Advance Medical Directive, a Health Care Directive, or a Physician's Directive (and you are probably asked every year by your doctor if you have one and requested to provide a copy for their records). Generally, the Living Will is a person’s written declaration of what life-sustaining medical treatments will be allowed or refused in the event a person should enter in a persistent vegetative state or develop a terminal condition. Many factors must be considered, including but not limited to: finances, health insurance, age, quality of life, the potential burden on loved ones, etc. A Living Will does not become effective unless you are incapacitated; until then you will be able to say what treatments you do or do not want. In most cases, a certification by your doctor and another doctor stating that you are either suffering from a terminal illness or permanently unconscious will be required before becoming effective.
Summary
Estate planning essentially is a way to organize your financial affairs so that when you are unable to manage them yourself, someone of your choice can step in and do it the way you prefer it to be done. It is strongly recommended that you have your estate planning documents drafted by a professional to ensure that they are prepared in accordance with state laws, and you and your loved ones do not end up with estate planning documents that will be contested and invalidated in the courts.
In addition, you should consider renting a safe deposit box at a bank. Into this box, you should put all of your important papers, including the originals of the foregoing documents. Those persons trying to take care of your business affairs will have one central place to go for all necessary documents. Of course, you should keep copies at home in a well known, but secure place, so that, absent immediate access to the safe deposit box, copies are readily available to your spouse, adult children, Executor, Representative, and Surrogate.
Please call me at 407-701-7530 for a free telephone interview. B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
Thursday, April 15, 2010
SO YOU WANT TO START A NEW BUSINESS?
I have assisted a number of clients form business entities that meet their particular business and economic concerns. I have noticed that a number of things of a minor nature always come as a “surprise” to my clients, and I would like to share some simple procedures with my readers that may save you time and money in the future. Whether or not you choose to use an experienced business lawyer to assist in setting up your business, remember these few tips:
1. Do you need to file a fictitious name application? Unless your business uses your legal name as the trade name, Florida law requires a simple filing with the state. Don’t forget to do it. It’s simple to fill out the forms and inexpensive. Why you ask? First, not filing the application is a misdemeanor. Second, you can’t file a lawsuit; in addition you may be liable for a plaintiff’s attorney fees if you don’t. Third, most governmental authorities require it, if needed, just to get a permit to do business.
2. Do I need a permit to do business? Yes, both City and County regulations typically require you to get a permit to transact business if you have an “office” in their jurisdiction. (Most places in Florida now call it a Business Tax Receipt and/or Occupational License. You may need both.) This means that even if you work out of your home, you need this permit. There really are very few exceptions.
3. Are you moving into an office building? Be sure to find out if it is zoned properly for your type of business. Will renovations require a permit? Are there sufficient parking and adequate utilities. Is it open for weekend appointments?
4. Do you need a Federal ID number? If you are going to hire employees, which includes your or family members, the answer is “yes”. It is a straight forward process and can be done over the internet. There are a number of tax advantages that are available to you, so talk to your CPA about these issues.
5. Are you an “internet” based business? Many of these issues are too complicated to discuss here, but all of the above probably applies to you.
Without knowing the specifics of your business, there may be many other concerns not listed here that will need your attention. An experienced business attorney can coordinate all of these and similar issues with your CPA and other professional consultants. Don’t hesitate to avoid missteps and mistakes now that may be a hindrance to your future success.
Please call me at 407-701-7530 for a free telephone interview.
B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
1. Do you need to file a fictitious name application? Unless your business uses your legal name as the trade name, Florida law requires a simple filing with the state. Don’t forget to do it. It’s simple to fill out the forms and inexpensive. Why you ask? First, not filing the application is a misdemeanor. Second, you can’t file a lawsuit; in addition you may be liable for a plaintiff’s attorney fees if you don’t. Third, most governmental authorities require it, if needed, just to get a permit to do business.
2. Do I need a permit to do business? Yes, both City and County regulations typically require you to get a permit to transact business if you have an “office” in their jurisdiction. (Most places in Florida now call it a Business Tax Receipt and/or Occupational License. You may need both.) This means that even if you work out of your home, you need this permit. There really are very few exceptions.
3. Are you moving into an office building? Be sure to find out if it is zoned properly for your type of business. Will renovations require a permit? Are there sufficient parking and adequate utilities. Is it open for weekend appointments?
4. Do you need a Federal ID number? If you are going to hire employees, which includes your or family members, the answer is “yes”. It is a straight forward process and can be done over the internet. There are a number of tax advantages that are available to you, so talk to your CPA about these issues.
5. Are you an “internet” based business? Many of these issues are too complicated to discuss here, but all of the above probably applies to you.
Without knowing the specifics of your business, there may be many other concerns not listed here that will need your attention. An experienced business attorney can coordinate all of these and similar issues with your CPA and other professional consultants. Don’t hesitate to avoid missteps and mistakes now that may be a hindrance to your future success.
Please call me at 407-701-7530 for a free telephone interview.
B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
Thursday, September 3, 2009
THE FRANCHISEE PERSPECTIVE: BE ON THE LOOKOUT
I often receive calls from people who are looking to start their “own” business and have been talking to franchisors about buying into the franchisor’s system. They have a franchise agreement in front of them, and want an attorney to make a quick review, and explain one or two matters to them, so they can proceed to sign on the dotted line by some unfathomable deadline. In answer to my question as to whether or not they have reviewed the franchise disclosure document (FDD) provided by the franchisor, too often I am advised sheepishly that they have only made a cursory review of the FDD. Taking the time to read that 60 to 100 page document because it’s “too technical”, “too boring”, “not understandable”, “unnecessary”, etc., often seems too daunting a task.
It’s at this point that I give my caller some cautionary advice. It is a waste of your time and money to see me for a consult on the franchise until you have done some minimal homework. It takes hours to go through an entire FDD, and it is unreasonable to expect any meaningful advice in a one or two hour consult unless they have done at least three (3) things:
1. Read the FDD and all attachments, including the franchise agreement, in their entirety;
2. Marked the FDD and attachments, flagging items they do not understand or on which they need further clarification (preferably making a written list of all these matters); and
3. Call and talk to least three (3) of each of the listed current and terminated franchisees disclosed in the FDD for their impressions of the franchise and the franchisor.
Here are just a few of the things they will learn by doing their homework:
1. Who the franchisor is, what experience he has in the business, just what the business is, and the past or current problems the franchisor is experiencing;
2. Upfront costs to start up and open the business, and what you will be paying on a weekly, monthly and/or annual basis to stay in business;
3. The type of restrictions the franchisor is placing on the “approved” location, the products and services you can offer, and what other “profit centers” the franchisor has built into his system;
4. Your obligations to the franchisor, both in-term and post-term, and your financial exposure if you fail to live up to those obligations;
5. The obligations of the franchisor to provide initial and on-going assistance in the operation of the business, and to protect you from competition from both the franchisor’s own outlets and other franchisees’ outlets;
6. The financial condition of the franchisor and whether the franchisor has the where-with-all to meet its continuing obligations.
Obviously, there is much more to the franchise relationship that needs to be considered, and you should take the time to understand what you are getting into. Doing the homework will increase the practical value of the consult, and you will be able to make a more reasoned decision as to whether to pursue the opportunity or to keep looking for one that better meets your expectations and objectives.
It’s at this point that I give my caller some cautionary advice. It is a waste of your time and money to see me for a consult on the franchise until you have done some minimal homework. It takes hours to go through an entire FDD, and it is unreasonable to expect any meaningful advice in a one or two hour consult unless they have done at least three (3) things:
1. Read the FDD and all attachments, including the franchise agreement, in their entirety;
2. Marked the FDD and attachments, flagging items they do not understand or on which they need further clarification (preferably making a written list of all these matters); and
3. Call and talk to least three (3) of each of the listed current and terminated franchisees disclosed in the FDD for their impressions of the franchise and the franchisor.
Here are just a few of the things they will learn by doing their homework:
1. Who the franchisor is, what experience he has in the business, just what the business is, and the past or current problems the franchisor is experiencing;
2. Upfront costs to start up and open the business, and what you will be paying on a weekly, monthly and/or annual basis to stay in business;
3. The type of restrictions the franchisor is placing on the “approved” location, the products and services you can offer, and what other “profit centers” the franchisor has built into his system;
4. Your obligations to the franchisor, both in-term and post-term, and your financial exposure if you fail to live up to those obligations;
5. The obligations of the franchisor to provide initial and on-going assistance in the operation of the business, and to protect you from competition from both the franchisor’s own outlets and other franchisees’ outlets;
6. The financial condition of the franchisor and whether the franchisor has the where-with-all to meet its continuing obligations.
Obviously, there is much more to the franchise relationship that needs to be considered, and you should take the time to understand what you are getting into. Doing the homework will increase the practical value of the consult, and you will be able to make a more reasoned decision as to whether to pursue the opportunity or to keep looking for one that better meets your expectations and objectives.
Wednesday, July 15, 2009
Is franchising the best way to expand my business?
Before taking the leap into franchising your business, let’s look at some of the various alternatives to franchising. Franchising is an expensive undertaking, so a different expansion strategy might be a possible route to consider. We will very briefly look at 5 other business expansion vehicles compared to franchising:
o Company-owned expansion
o Joint Ventures and Partnerships
o Independent Sales Representatives
o Licensing
o Distributorships/Dealerships
o Franchising
2. Joint Ventures/Partnerships
Advantages: Fewer regulatory requirements, greater control and flexibility, synergies of combined business skills.
Disadvantages: Moderate capital outlays, joint and several liability, no up-front payments, direct financial impact of failures, local state regulations.
3. Independent Sales Representatives
Advantages: Independent agent, not an employee, fewer local state regulations, no direct impact for representative’s failure to make sales (hire other salespersons as needed).
Disadvantages: Agency liability, potential tax treatment as an employee, non-exclusive relationship with product.
4. Licensing
Advantages: Lower capital outlay, fewer local state regulations, licensing and royalty fees, minimal oversight and staffing, minimal direct financial impact for failures.
Disadvantages: Minimal controls, teetering on the franchise vs. license ledge (the inadvertent franchise), monitoring issues, “at-will” relationship.
5. Distributorships/Dealerships
Advantages: Lower capital outlay, fewer local state regulations, increased market penetration, potential sharing of some advertising costs, minimal direct financial impact for failures.
Disadvantages: Minimal controls, teetering on the franchise/employee ledge (the inadvertent franchise/employer), monitoring issues, potential termination and renewal, local state regulations, no fees or royalties per se, potential non-exclusive relationship with product.
6. Franchising
Advantages: Greater control of quality and uniformity of brand, franchise fees and royalties, lower capital outlay, motivated operators, enhanced trademark value, no employee burdens, no direct financial impact for failures, increased market penetration.
Disadvantages: Initial costs of setting up system and annual updating costs, significant state and federal regulatory requirements, audit expenses, employing a franchise staff, monitoring of quality and uniformity, greater local state regulations.
The foregoing is not intended to be exhaustive analysis of advantages and disadvantages. You should consult your business attorney or consultant for an in-depth discussion of each business format. However, you should consider whether you and your product might be better suited for an alternative to franchising. In fact, you might look at one or two of these alternatives as stepping stones to ultimately franchising.
Please call me at 407-701-7530 for a free telephone interview.
B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
o Company-owned expansion
o Joint Ventures and Partnerships
o Independent Sales Representatives
o Licensing
o Distributorships/Dealerships
o Franchising
1. Company-owned expansion
Advantages: Basically, branch offices with control over all aspects of the business.
Disadvantages: Heavy capital outlay, management and employee issues, local state regulations, and ownership liability to third parties, direct financial impact of failures.
2. Joint Ventures/Partnerships
Advantages: Fewer regulatory requirements, greater control and flexibility, synergies of combined business skills.
Disadvantages: Moderate capital outlays, joint and several liability, no up-front payments, direct financial impact of failures, local state regulations.
3. Independent Sales Representatives
Advantages: Independent agent, not an employee, fewer local state regulations, no direct impact for representative’s failure to make sales (hire other salespersons as needed).
Disadvantages: Agency liability, potential tax treatment as an employee, non-exclusive relationship with product.
4. Licensing
Advantages: Lower capital outlay, fewer local state regulations, licensing and royalty fees, minimal oversight and staffing, minimal direct financial impact for failures.
Disadvantages: Minimal controls, teetering on the franchise vs. license ledge (the inadvertent franchise), monitoring issues, “at-will” relationship.
5. Distributorships/Dealerships
Advantages: Lower capital outlay, fewer local state regulations, increased market penetration, potential sharing of some advertising costs, minimal direct financial impact for failures.
Disadvantages: Minimal controls, teetering on the franchise/employee ledge (the inadvertent franchise/employer), monitoring issues, potential termination and renewal, local state regulations, no fees or royalties per se, potential non-exclusive relationship with product.
6. Franchising
Advantages: Greater control of quality and uniformity of brand, franchise fees and royalties, lower capital outlay, motivated operators, enhanced trademark value, no employee burdens, no direct financial impact for failures, increased market penetration.
Disadvantages: Initial costs of setting up system and annual updating costs, significant state and federal regulatory requirements, audit expenses, employing a franchise staff, monitoring of quality and uniformity, greater local state regulations.
The foregoing is not intended to be exhaustive analysis of advantages and disadvantages. You should consult your business attorney or consultant for an in-depth discussion of each business format. However, you should consider whether you and your product might be better suited for an alternative to franchising. In fact, you might look at one or two of these alternatives as stepping stones to ultimately franchising.
Please call me at 407-701-7530 for a free telephone interview.
B.F. "Biff" Godfrey, Esq.
B.F. GODFREY, P.A.
2601 Technology Dr.
Orlando, FL 32804
(407) 701-7530 (off)
(407) 578-2347 (fax)
biff@godfreylegal.com
www.godfreylegal.com
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