One of the biggest frustration points for new franchisors is the sticker shock in terms of dollars, time and headache when they learn that they need audited financial statements of their franchisor entity. By Tom Spadea
It is so tempting for a franchisor to only tout what they do well, the good decisions they have made and the incredible systems they have built. Although it may sound counterintuitive, a big part of the value of experienced brands comes from all the things they didn’t do well over the years. Franchising works because new franchisees build their business on the shoulders of those who came before them. By Tom Spadea
The Corporate Transparency Act (CTA) has created an obligation for all businesses to file with the federal government information on who owns and controls every company currently in existence or to confirm they are exempt from filing. By Tom Spadea
Absolutely! If you make $100 in profit, that $100 on the open market is worth the multiple of the earnings in the business it is generated. If you pay that $100 in royalties to the franchisor, that $100 becomes an expense to your operating unit and profit to the franchisor. By Tom Spadea
At some point, everyone involved in franchise development is going to be asked this question by a prospect. It is not unreasonable for a prospective franchisee to want to know the answer. By Tom Spadea
Founders of franchise systems spend time, treasure and pain to get their system to the point that it has significant enterprise value. Many have a numerical goal for that value and a timeline for when they want to harvest their years of hard work. By Tom Spadea
If you make $100 in profit, that $100 on the open market is worth the multiple of the earnings in the business it is generated. If you pay that $100 in royalties to the franchisor, that $100 becomes an expense to your operating unit and profit to the franchisor. By Tom Spadea
As a franchise attorney, I have witnessed some clients go from a few locations to hundreds in a surprisingly short amount of time. All of them have strong brand name, great unit economics and solid systems, but the primary factor that seems to set them apart is the quality of teaching, advice and coaching the franchisor furnishes to its franchisees. By Tom Spadea
Franchising is about creating a community of business owners working out of the same system and sharing the same goals, metrics, brand, system, etc. It is franchise malpractice to not have your franchisees reporting their numbers in a uniform way, which starts with a standard chart of accounts for your franchisees. If you don’t have a standard chart of accounts, then how do your franchisees know what winning looks like? By Tom Spadea
It’s that time again, when most franchisors start to think about updating their Franchise Disclosure Document (FDD) for next year. Around the time this article gets published in early December, if you are a franchisor client of ours, you should be receiving your first “FDD Renewal Reminder” email. By Tom Spadea