Assignment:
Discussion: Bringing the Franchise to Market
Determine which business in one's area is franchiseable-what could be done to help this business assess its market? What niche is it filling? What steps are most important? Why? (Please also make comment on the examples too)
Example 1
The business in my neighborhood that is franchise able is Jordan Johnson Seafood. To help the business assess a greater market could be to franchise and market to a larger area. I think they could start by having a website. I think the website should be inclusive of the menu as well as provide the opportunity to order online and receive coupons and discounts. Another way to create a greater access is to deliver to a larger area. I think that marketing to the entire city would provide a greater opportunity and reach a larger consumer based audience. The niche that Jordan Johnson Seafood has is reaching people that like seafood and special seafood entrées. They offer direct sales to the community. They also provide a product and a service. The most important steps to securing a franchise is to have a target market and have proven system that can be transferred into a plan for a franchise.
Example 2
I found a local juice bar and smoothies business franchisable; it's neighborhood juice bar where fresh fruits and vegetables are used to make fresh with many recipes while keeping prices accessible to all and the taste is great making it easier to embrace green. For those familiar with juicing, it has health benefits and many already made so call healthy version of green juice are not that fresh and they contain added sugar and preservatives. In addition, juicing at home is time consuming so being able to get the fresh juice at a competitive price is a good idea. This business I filling the niche of young and older people looking for healthy food choices.
To help this business assess its market the owners must first promote their bar as an alternative healthy hangout. The strongest appeal juice bars possess is the health appeal. Then proceed to hire a lawyer to inform them on how to franchise their business with franchising laws and regulations. Then they would need to make a franchise plan that would include defining fees, training, etc.
8-2 Wiki: Research State Franchise Laws
Research your state's franchise laws. What about the laws is particularly important to know? How would this affect the way you approach franchising a business in your state? Post your findings and comments in the wiki. Be sure to post your state, what you found that was important, and the impact it will make on your franchise.
If another student has already posted the laws in your state, choose another state in your area. (No need to make comment on the examples)
Example 1
Ohio Franchise Laws:
The FTC (Federal Trade Commission) has many universal laws but each state has their own set of laws as well. "The Ohio Business Opportunity Plan Law applies to many, but not all, sales of franchises in Ohio. The law prohibits misrepresentations, requires presale disclosures to the franchisee and provides for the right to cancel during the five-day ‘cooling off' following the signing of the franchise agreement" (Franchise Laws Protect Investors, 2014). The Ohio law also allows franchisee's to sue for damages (potentially could be tripled), other relief, as well as attorney fees. The franchisee should consult an attorney right away if the franchisee feels that the franchisor did not comply with the FTC or Ohio laws.
Stanley Dub (Business Opportunity Law Attorney) said, "The Ohio law, like several other state laws, gives franchisees the right to see for violation of disclosure laws without proof of fraud" (Sniegowski, 2013). Franchise Agreements used to state that fights or disagreements be handled out-of-state (normally through arbitration). "While arbitration clauses will presumably still be enforceable, the revised law requires that the disputes be adjudicated inside Ohio" (Dub, 2014).
Keith Miller (chairman of the Coalition of Franchisee Associations) says, "Coupled with our efforts on educating lawmakers on franchisee issues through the Universal Franchisee Bill of Rights, additional activity is taking place in 2013. Lawmakers are being constantly reminded that it is the franchisees that invest and employ in their states and districts. And, unlike a well regulated security, franchisees are risking much more than their initial investment. Requiring proper disclosure and providing franchisees better legal remedies will help provide protections that strengthen the franchise industry by encouraging more franchisee investment" (Sniegowski, 2013).
References
Dub, S. (n.d.). Recent Revision of Ohio Business Opportunity Law provides new protections for Franchisees. American Association of Franchisees Dealers RSS. Retrieved May 21, 2014, from https://www.aafd.org/recent-revision-of- ohio-business-opportunity-law-provides-new-protections-for-franchisees/
Franchise Laws Protect Investors. (n.d.). Ohio State Bar Association. Retrieved May 21, 2014, from https://www.ohiobar.org/ForPublic/Resources/LawYouCanUse/Pages/LawYouCanUse-137.aspx
Sniegowski, D. (2013, February 18). Ohio Passes Law to Protect Franchisees. Blue MauMau franchise news for the franchisee. Retrieved May 21, 2014, from https://www.bluemaumau.org/12396/ohio_passes_law_protect_franchisees
Example 2
The Commonwealth of Virginia
Franchise laws in The Commonwealth are governed by, The State Corporation Commission or SCC. The "...rules and regulations that apply to securities, franchise, and trademark issues are filed with the Virginia Administrative Code" (SCC, 2014, para 1).
There is an overwhelming amount of legislation, rules and laws that govern this process of registering, selling and purchasing a franchise in Virginia. For this WiKi assignment, I will select those known to have an impact on all parties.
First of all, if a business owner seeks to franchise, it must be registered in The Commonwealth prior to the sell of a unit. Further, the franchisor must provide a copy of the Franchise Disclosure Documents to the state and all prospective franchisees' prior to the execution of a franchise.
A franchisee has the authority to end an agreement if the franchisor has not provided, "...a copy of the franchise agreement and disclosure documents at least 72 hours prior to execution of the franchise..." (Voidable franchises, 2014, para 4).
Virginia also requires the start up to use unaudited financial statements in its FDD, and they must add an audited opening balance sheet.
The uniform state cover page adopted by the North American Securities Administrator's Association must also be included in the franchisor's FDD. The NASAA is, "...An international investor protection organization comprised of the state securities agencies, provincial, and territorial securities administrators..." (Investor Guide, 2014, para 1).
Here are two interesting points to the Code of Virginia.
If a franchisor becomes insolvent, he/she is possibly able to register and operate a franchise in Virginia. There are stipulations involved, but there is the chance that the State will authorize or approve the request from an insolvent franchisor. The SCC and Code of Virginia asks for,
The franchisor may submit financial statements of its affiliate. The affiliate must meet solvency requirements and absolutely and unconditionally guarantee the performance of the franchisor. The Commission may require as a condition of registration or renewal of registration: the escrow or deferral of franchise fees and other funds paid by the franchisee to the franchisor until the franchisor's pre-opening obligations are fulfilled.
Also important to the franchisee, they have the right to negotiate the terms of the Franchise Agreement. What is presented is negotiable. All of the information shared is pertinent to the search and discovery process needed in locating the ultimate franchise opportunity. The facts about insolvency, and negotiating the FA, I like for the prospect.
References
Investor Guide. (2014)
Retrieved from https://www.investorguide.com/definition/north-american- securities-administrators-association-nasaa.html
State Corporation Commission. (2014). Franchises. Retrieved from
https://www.scc.virginia.gov/srf/faq/fran.aspx
Voidable franchises. (2014). The Commonwealth of Virginia. Retrieved from
https://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+13.1-565