2 – 1: Franchise agreement—franchisor perspective: Select one of the franchise agreements posted by your classmates in the franchise agreement wiki. Identify unique aspects of the agreement. Why do you think this franchise agreement was written with these requirements? Why would you buy/not buy this franchise based upon the factors that you discovered? Review the comments posted by three of your classmates and provide your own analysis.

Answer this question

Class, did you know that a Franchise Agreement is a legal, binding contract between a franchisor and franchisee, enforced in the United States at the State level.

Prior to a franchisee signing a contract, the US Federal Trade Commission regulates information disclosures under the authority of The Franchise Rule. The Franchise Rule requires a franchisee be supplied a Uniform Franchise Offering Circular (UFOC) or Franchise Disclosure Document (FDD) prior to signing a franchise agreement, a minimum of ten days before signing a franchise agreement.

Once the Federal ten day waiting period has passed, the Franchise Agreement becomes a State level jurisdiction document. Each state has unique laws regarding franchise agreements.

Can you add your insight to this?

2 – 2: Find a franchise agreement. Identify the agreement’s benefits and requirements of the franchisor and franchisee. Would you buy this franchise?

Example 1

The franchise agreement I looked at is for Chili’s Bar and Grill Restaurant.  There are six main requirements of the franchisor in this agreement.  These requirements include that the franchisor will; provide the initial training of up to four managers, provide on-site pre-opening and opening supervision and assistance (which may include the opening crew), make available the research data on marketing and advertising and have the right to approve and disapprove all advertising, provide one copy of the Confidential Manual of Operating Data, provide advice and materials for managing and new developments for improvements in the restaurant business, and must seek to maintain the high standards of quality in appearance and service.  The franchisee will pay the franchisor an initial franchise fee of $40,000.  This will be split between the date of construction and ten days before the restaurant is to open for business.  The franchisee will then pay the franchisor a monthly fee of four percent of the gross sales of the restaurant.  Aside from payments, the franchisee is also responsible for other aspects such as be qualified and authorized to do business in each jurisdiction the business takes place.  There are also many other requirements such as the responsibility for expenses due to training, using the restaurant building only for the restaurant business, and responsibility to maintain a competent and trained staff (Onecle 2014).

The agreement is forty-one pages long.  Each section has many requirements and each requirement is a paragraph long.  The agreement is very descriptive and seems to cover everything.  It covers many different scenarios and offer very specific instructions, requirements, and responsibilities.  I would look at data on the future of the restaurant before I decided whether or not to buy the franchise to see what type of future the restaurant is likely to have.  Otherwise, I think this franchise is one to look at as a possible purchase.

Oncele. (2014). Chili’s Grill & Bar (R) Restaurant Franchise Agreement. Retrieved from: http://contracts.onecle.com/bertuccis/chilis-franchise-1997-09-22.shtml

Example 2

The UPS Storehttp://www.theupsstorefranchise.com/

The UPS Store will offer assistance in selecting a location, negating the lease, designing the store, and getting the store running. They will also help with advertising to build up excitement and let people in the community know the store is opening. Their public relations team will provide the tools needed to get local media coverage for the store.

The UPS Store also offers training.  Before you open your store you get one month of training to help develop your business knowledge and day-to-day operational skills.  UPS Store is associated with Franchise America Finance and The Bancorp Bank, and with the help of these companies they will provide access to financing resources.

They also offer support day or night to franchise owners. They are also continually researching new products and services to help owners serve their customers better.The benefits of The UPS Store franchise is brand strength, national marketing, world class training, dedicated support and tools, retail solutions, and multi-unit opportunities.

To start up a UPS Store franchise an owner needs to account for start up costs at a traditional location range from $148,734 to $347,241.  Start up costs of a new Main Street location ranges between $118,714 and $216,097.  Franchisees must meet the minimal financial requirements and be able to capitalize the franchise investment, including work capital and any living expenses during the set-up period.  All franchisees must be able to verify a minimum of $60,000 in liquid assets.  A co-applicant can help meet these requirements.

To get approval a franchisee must go through an approval process.  The first step is to attend a national webinar and fill out an application.  The second step is the first interview, the franchise disclosure is completed, financials are submitted, and an executive interview is conducted.  The third step is the signing of the letter of intent, initial application fee is collected, and an approval letter is sent.  The final step is securing the financials, site approval, lease signing, the 5 week training course is completed, and the franchise agreement is signed.

I think this is a good franchise to buy into.  They have a nationally known name and people are aware of what they do.  They offer training to make sure you have the knowledge and means to successfully run a store.  They also help with the finances to make sure the store can be successful.