The first and foremost responsibility of a franchisor is to develop, sustain and grow a business model that is profitable at the franchise operator level. The franchisor is also responsible for developing systems and support functions that directly contribute to the success of the parent organization and its franchisees. A franchisee, for lack of a better metaphor, is purchasing "a better mouse trap". The franchisor is being paid for providing a mouse trap that actually catches mice.

The successful franchisor/franchisee relationship should be based on the team concept. Both members of the team need to assume responsibility for growing the company in a manner that meets both entities' financial and personal goals. Both parties must strive to create a relationship that is characterized by open, honest communication, and mutual trust. Each must be willing to "walk in the other's shoes" when conflicts arise or goals diverge. Neither entity, franchisor nor franchisee, will long exist without the success of the other.

I. Starting a Franchise
II. Find Potential Franchisees
III. Qualify Potential Franchisees
IV. Franchisee Training
V. Financing
VI. Real Estate Acquisitions and Leases
VII. Franchise Sales and Marketing
VIII. On-going Business Support
IX. Franchise Advisory Councils
X. Administrative support
XI. Organizational Development Support

If you want to start a franchise system, you should first understand the legal definition of a "franchise" and why the franchise business model is often successful. The specific legal definition of a franchise varies from state to state, but generally, a franchise is an arrangement in which:

i. a person (the "franchisor") offers the right to others to offer, sell or distribute goods or services under a marketing plan or under the franchisor's control; and

ii. the franchisee uses the franchisor's name, mark, logo or other commercial symbol in the operation of the business; and

iii. the franchisee is required to pay money or other consideration to the franchisor, directly or indirectly.

The elements of the "franchise" definition describe the potential benefits of the franchise business model. Franchisors enjoy initial and ongoing franchise fees from franchisees. Franchisees readily pay the fees because they secure the right to operate under a reputable name and receive valuable assistance from the franchisor in marketing and business operations.

The franchising model generally permits a company to expand its business faster and with less money than expansion through company-owned stores. Rather than using the franchisor's capital and extending its liabilities, the franchisees essentially become "investors". They provide the capital to establish a franchise store (e.g. for store build out, equipment, employee and manager salaries, etc.) and assume the store's liabilities (e.g. lease obligations, legal responsibility for the store's operations, debts, and conduct, etc.).

If you want to start a franchise system, you should understand and consider non-franchise alternatives. Such alternatives may or may not work well for your business. A business arrangement that is missing any one prong from the above "franchise" legal definition may not be a franchise. Various alternatives to franchising are described at http://www.franchisesmith.com/franchisingalternatives.html. Proceed with caution, however; there are other laws that govern non-franchise business arrangements such as business opportunity disclosure laws.

If you have a concept that you think may be suitable for franchising, our franchise consulting team will analyze your concept and prepare a feasibility study that includes costs and market desirability.

Generally speaking, your business should have a system of operations that works and that could be duplicated by franchisees. It is helpful to have a strong business name resulting from public acceptance, uniqueness and/or legal registration of the name. Our trademark attorneys can help you develop the legal strength of your business name, trademarks, service marks and logos.

There are various federal and state laws that apply to either franchised businesses or to many non-franchise alternatives. Visit www.franchisesmith.com/franchiseservices for a detailed description of some of these laws. To ensure your compliance with state and federal franchise laws, contact an experienced franchise lawyer to franchise your business. Generally speaking, franchise laws fall in three major categories:

• Prepare an informational prospectus called a Uniform Franchise Offering Circular or "UFOC". The UFOC describes important information about the franchisor company and its owners, particular aspects of the franchise system and the future franchise relationship, and the terms of the franchise contract.
• Deliver the UFOC to prospective franchise buyers in accordance with specific time frames.

The Federal Trade Commission has recently adopted a new federal franchise disclosure law (the amended FTC Rule). Before this law becomes fully effective, there will be a phase in period from July, 1 2007 to July 1, 2008. State administrators will likely revise state franchise laws in response to the new federal law. Visit www.franchisesmith.com for more information.

An experienced franchised lawyer will help you comply with state franchise registration and exemption laws. More than a dozen states have franchise registration or exemption requirements. Many of these states require submission of a state filing fee, a copy of the UFOC, and other application materials. In many states, administrators review and comment on the UFOC's content and on the other registration application materials. If there are comments, the administrator often requires revisions to the application materials before approval. A qualified franchise lawyer will respond to state administrator comments. The franchise attorneys at FranchiseSmith, LLC have formed many important relationships with state franchise administrators.

A franchise lawyer can help you comply with state franchise relationship laws. These franchise laws govern the relationship between the franchisor and its franchisees. Not all states have franchise relationship laws. Generally, if a franchise relationship law applies, it trumps inconsistent terms in the franchise agreement. State franchise relationship laws may cover issues such as:

• Reasons for which franchisor may or may not terminate the franchise relationship;
• The required notice that must be given to a franchisee prior to termination;
• Standard of dealings between the franchisor and its franchisees ("good faith");
• The franchisees’ ability to form franchisee associations;
• The franchisees’ ability to purchase goods and services from suppliers other than those specified by the franchisor;
• Discrimination between franchisees in the charges offered or made for royalties, goods, services, equipment, advertising services, etc.;
• Non-renewal of a franchisee’s franchise agreement; and
• The franchisor’s placement of competing stores within a franchisee's exclusive territory (if such a territory is granted in the franchise agreement).

The Internet has become a valuable resource for every business whether you are selling a franchise, buying a franchise or looking for potential franchisees. We have relationships with web developers who are experts in designing and maintaining the most vibrant and effective web sites available. The web designers will work to make your site user-friendly and provide links to the most popular sites.

Potential franchisees are often obtained through more traditional advertising sources. Advertising in trade publications and national business publications can often yield positive results. In addition, we can help establish connections with National Franchise Associations and Local Franchise Conventions.

Developing relationships with local and national business brokers can be helpful when both buying and selling franchises. These brokers are often already working with clients who are financially qualified and suitable for your concept.

Our consulting team has established contacts throughout the franchise industry. These contacts are invaluable in helping franchisors network with brokers, venture capitalists, and other professionals.

Selecting a franchisee to represent your company and your brand is tantamount to selecting a partner for your business. The objective is to select franchise partners who are financially stable, excited about the business, and have the business and operational skills to ensure a successful venture.

Pacific West Consulting Group, LLC's (PWCG) franchise consultants have in depth experience on both sides of the franchising business and can assist you in developing a franchisee selection and qualification process. Our franchise consultants can help you develop a screening process that establishes specific criteria for financial strength, previous background and business experience, as well as entrepreneurship.

PWCG's franchise consultants can help you develop a final qualification program that allows a potential franchisee to spend a day in the role of an operator. This program allows the prospective franchisee to evaluate the system and allows the franchisor to evaluate the applicant's suitability. In some cases the franchisee may not be the primary "operator" of the business. In these cases PWCG's consultants will develop a similar qualification/approval process for the individual(s) who will serve as primary operations management.

Operations training consists of training in customer service, product knowledge, and human resource functions such as staffing. Interviewing and hiring techniques are also an important part of operations training.

Training in systems includes Point-of-Sale (POS) training, inventory management and control, accounting and labor scheduling.

Leadership training consists of training managers and employees in the area of goal setting and employee incentives.

Whether starting a franchise or buying a franchise, financing is a key element of the business development process. Through Pacific West Ventures, LLC, we provide financial help in both debt and equity financing.

A franchisor's role is just beginning when the franchise documents are signed, the franchise fees are paid, and the new franchisee joins the system. Not only is it incumbent upon the franchisor to continue to improve and develop the business model but it is also the ongoing role of the franchisor to act as an advisor, mentor, and auditor to the franchisee. Pacific West Consulting Group, LLC's (PWCG) franchise consultants can guide you through development of the programs that will fulfill these ongoing support obligations. These functions include programs such as on-site operational reviews, operator and employee training, brand and trademark compliance, and comparative financial performance reviews. PWCG will also provide guidance in the areas of employee selection and staffing to ensure an optimal level of support is achieved.

Developing your administrative support tools such as operations manuals, employee handbooks, point of sales manuals and product specifications can be time consuming and when they are finished you still may not have sufficiently met all legal and regulatory requirements. Our legal and franchise consultants will work with you to prepare these materials and to ensure these administrative tools meet relevant federal and state regulatory requirements. We can also assist in the development of operational check lists, employee performance metrics, employee evaluations and incentive plans.

Pacific West Consulting Group, LLC's (PWCG) staff of franchise consultants has decades of experience as both franchisor and as franchisee. As any organization grows there is always the dilemma presented by what is effective and what is efficient. In order to support growth, adequate systems and man power must be applied. However, growth without discipline leaves stakeholders on the short end of the financial stick.

PWCG's depth of experience leaves it uniquely qualified to assist in developing an organizational structure and system that is both effective and efficient. The experience of PWCG's consultants ranges from small start ups to Fortune 100 companies. This experience base gives PWCG a unique overview of staffing models, incentive programs, compensation, and performance management systems that can be utilized to successfully grow your business.