WHY COMPANIES FRANCHISE A BUSINESS MODEL Imagine opening 100 new business locations without having to foot any bills for real estate, equipment and build out costs or taking on any risk. Even more, imagine managers running all those locations, which are just as committed to growing the company as you - and not having to pay them a dime.

1. Franchise Foundations - 4157 23rd Street,SanFrancisco,California94114
Ph: 800.942.4402 Page 1
HOW TO FRANCHISE A BUSINESS – TIPS
FROM AN MBA FRANCHISE ATTORNEY AND
FORMER FRANCHISE OWNER
Copyright 2010, Kevin B. Murphy, B.S., M.B.A., J.D. - all rights reserved
WHY COMPANIES FRANCHISE A BUSINESS MODEL
Imagine opening 100 new business locations without having to foot any bills for real
estate, equipment and build out costs or taking on any risk. Even more, imagine
managers running all those locations, which are just as committed to growing the
company as you - and not having to pay them a dime. In fact they pay you money for the
right to operate your business model.
For many companies, creating a franchise program is a sensible way to achieve rapid,
profitable growth without giving up any control or ownership. Going from a single
location to a dozens or even hundreds is possible and well-documented because
franchise owner-investors put up all investment capital, shoulder all risk and assume all
day-to-day operating responsibilities. It's expansion, using OPM - Other People's Money.
ENTERING A NEW BUSINESS
The bad news is a company planning to franchise must realize it is entering a new
business, offering an entirely different service (training & support) to entirely new
customers (business owner-operators). This new business requires different skills,
abilities and expertise. In the new business of franchising, it is critical to develop
effective evaluation, documentation, mentoring, training and consulting skills.
THE FRANCHISE FEASIBILITY ANALYSIS PHASE
An indispensable step before any franchise a business development program gets
underway is an analysis of the concept and business model. Has the concept been
sufficiently proven in the marketplace? How profitable are existing prototypes or
company-owned outlets? Franchising will not solve existing problems, it will only
intensify them. Franchising is not a way to raise capital, get rich quickly or expand a

2. Franchise Foundations - 4157 23rd Street,SanFrancisco,California94114
Ph: 800.942.4402 Page 2
business with existing problems. There must be sufficient profitability in the business
model so that royalty and other payments can be made and leave the franchise owner
with a sufficient profit.
THE FRANCHISE STRATEGIC PLANNING PHASE
A successful franchise development program begins with a solid plan - a foundation for
franchising. Often there is little or no strategic planning with new companies entering
the franchise industry. This is because they utilize the services of a franchise consulting
firm or franchise attorney, where little or no attention is paid to critical strategic
planning issues. What is called for is not a traditional business plan, a rather thick
document that normally does nothing but collect dust in the dark drawer of
someone's desk. More important than a business plan is a strategic plan - a vision of
the franchise program together with a limited number of concrete, achievable action
steps.
THE FRANCHISE DOCUMENTATION PHASE
If your company made doing a good job at the planning stage its number one priority,
franchise documentation goals will be apparent. Proprietary assets (like recipes,
formulas, methods, branding, operating techniques and customer information) need to
be identified and protected. A catchy and appropriate name, logo and tag lines are
registered as trademarks or service marks.
A franchise operations manual and franchise training program are developed, often
from scratch, to impart business day-to-day operating skills to franchise owners as well
as ensure uniformity of products and services. The franchise operations manual and
training program curriculum must be drafted or edited with a particular focus. Certain
topics, chapters and policies used in manuals for company-owned locations, for
example, are entirely inappropriate in a franchise environment, creating significant
franchise liability issues.
Finally, and only after all of the above are underway, a FDD Franchise Disclosure
Document, similar to a securities (stock offering) prospectus, is prepared by a
competent franchise attorney. Doing it correctly and with a balanced, fair perspective
can save going to the courtroom later. Using a boilerplate or online FDD template will
almost certainly guarantee a visit to the courtroom down the road. Since these visits
cost hundreds of thousands of dollars and up, they are not cheap and far outweigh the
cost of doing it right to begin with.

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Training the Franchise Management Team
When the documentation phase is over, momentum gathers as the exciting
implementation phase begins. This is where the sparks begin to fly as franchises are
sold, new franchise owners are taught and trained, and opening assistance is provided.
It’s also when most new franchise companies make serious mistakes that haunt them
for years or even decades to come.
The reason: most new start-up franchise management teams have not been trained in
how to properly operate their new business, nor can they afford to hire a six-figure,
salaried person with franchise management experience. A more practical solution:
provide new franchise companies with in-depth franchise training instructional
workshops as well as on-going, as-needed advice based. At Franchise Foundations, we
offer this type of training and on-going support based on three decades of excellence
and experience in franchise industry best practices.
Author credentials and background:
Kevin B. Murphy, Mr. Franchise, is a franchise lawyer based in San Francisco with a 30-
year practice devoted exclusively to franchise law. For 20-years he has been a testifying
franchise expert witness in court and arbitration proceedings, giving him vast
experience in knowing where the bullets come from in franchise litigation. In 2002 -2003
he started, operated and sold a very successful franchise. Mr. Franchise holds degrees in
business administration and law from the University of San Francisco and an MBA from
San Francisco State University. He is the author of over 50 publications, including 4
books on franchising and one book on trade secrets.