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September 29, 2014 • An Advertising Supplement to the Los Angeles Business Journal

This special advertising supplement did not involve the reporting or editing staff of the Los Angeles Business Journal.

By KEN LYNCH

THE American Dream. It’s what this countrywas founded on. Many of us dream of work-ing hard, paying our “dues” and then realiz-

ing the rewards of owning our own homes and pos-sibly our own businesses. Working for others canteach us a strong work ethic, and what it takes tosucceed. There is no greater reward than workinghard for years and then taking all those benefits andall that knowledge and applying it to our own busi-ness. Set our own hours. Pave a path for success thatreaches beyond the 9-to-5 at someone else’s office.

That’s where entrepreneurship comes in. Manypeople open small businesses every year, only tofind the struggle too great and before long, thedream is over and the business closes. Conversely,opening a franchise allows you to benefit fromtraining and systems that have already proven to besuccessful. Typically, a franchisor helps you choosethe location for your business, provides training,marketing assistance and ongoing support.

Franchising is a business model and there areapproximately 3500 such business models tochoose from but only a handful can claim to be atthe absolute top of their respective industries. TheInternational Franchise Association’s most recentEconomic Outlook Report (2012) states that allfranchise segments will experience yearly growthwith business services being the highest at 3.6%.

Franchising creates 1 out of 8 jobs. Franchisesystems have a $2.8 trillion economic impact andprovide a framework so “you are in business foryourself not by yourself.” There are many franchiseoptions from which to choose, so here are someguidelines to consider when deciding which fran-chise is right for you.

Best fit for you

Take time for serious reflection and evaluationof what you enjoy and what’s important to you.Look for something that offers the hours you wantto work in a field that’s interesting to you.Consider how much money you have to investand how much money you need the business togenerate after all expenses. Explore financingoptions early so you know what you can afford.

Some franchise systems offer in-house financing orwill assist you with securing outside funding.

Choose a category

Consider the various types of franchise oppor-tunities in a general sense. Do you want to workout of your home? Have a retail location? Workoutdoors? Work with your family? Get it on thenext trend? Or be secure in a steadily growingsegment such as business services or fast food.

Target a few options

As you look at the industry types you have identi-fied, consider which of those have locations availablein your area. Pick a few that are interesting to youand contact those companies to request basic infor-mation. You should be able to gain a lot of informa-tion on their websites. If you are still interested afterseeing what they have to offer, start digging deeper.

Do the background work

Once you are a serious candidate, the fran-chisor will give you more information known as aFranchise Disclosure Document (FDD). Study itcarefully as it contains vital information for you

about the history of the company, any lawsuitsthey have been involved in, and the contract theywill want you to sign. You can also call or visitlocal franchisees to see if they are happy. Theyshould be able to tell you how the franchisor pro-vides ongoing support.

Take a final close look before deciding

If you are happy with the FDD and the resultsof your franchise conversations, visit the franchisorheadquarters to make sure the culture of the com-pany is a good fit. They will often pay for yourexpenses to have the opportunity to speak withyou directly. Make sure you meet the executivesand get a clear understanding of how the modelworks. Are you a good fit with their culture andvice versa? They will be like a family to you for 20years or more.

For more information about franchising go towww.franchise.org.

Ken Lynch is a Regional Vice President for the UnitedFranchise Group, parent company of Signarama andEmbroidMe, the top two brands in their categories. Go towww.unitedfranchisegroup.com for further information.

PRESENTING SPONSORS: GOLD SPONSORS:

Why Buy a Franchise?

FranchisingOpportunities inSouthern California

51 68_franchising_guide.qxp 9/25/2014 6:22 PM Page 51

52 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL SEPTEMBER 29, 2014

FRANCHISING OPPORTUNITIES IN SOUTHERN CALIFORNIA

FRANCHISING is big business and one of the hottest growth segments – now representing 10.5% of businesses in Los Angeles, andgrowing. In honor of this key business sector, we decided to create what you are holding in your hand — this special, first-of-its-kind “Franchising Opportunities in Southern California” supplement. In these pages you’ll find a number of guest writtenhow-to, trend, and advice pieces about franchising in the greater Los Angeles region and all the do’s and don’ts that comewith it. These articles were contributed by the those in the franchising trenches, speaking from first-hand experience – fromthe attorneys, accountants and consultants who help to make successful franchises happen, to the success stories told by some

of the hottest franchising brands themselves. The section is complemented by the Los Angeles Business Journal’s inaugural event, our Franchising Opportunities in Southern California

October 3rd breakfast meeting, complete with a live panel discussion roundtable boasting a group of experts with their fingers on the pulse offranchising opportunities in the region. Many thanks to our presenting sponsors, and our esteemed panel of experts, who are profiled below.

Barry KurtzChair, Franchise & Distribution

Practice Group

Lewitt, Hackman, Shapiro,

Marshall & Harlan

BARRY Kurtz is the Chair of the Franchise &Distribution Practice Group at LewittHackman in Encino. He is certified as a

Legal Specialist in Franchise & Distribution Lawby The State Bar of California Board of LegalSpecialization, and serves on the State Bar ofCalifornia Franchise and Distribution LawAdvisory Commission.

Kurtz represents franchisors, manufacturers,franchisees and distributors in a wide range of mat-ters, including the preparation of franchise regis-tration and disclosure documents; the structuringof franchisors and franchisees; work-out arrange-ments with distressed franchisees; franchisor andfranchisee disputes and default and terminationmatters; acquisitions and dispositions of fran-chisors and franchised and independent business-es; and beer distribution transactions.

Rated 5.0 AV Preeminent, Martindale-Hubbell’shighest award for legal ability and ethics, Kurtz hasbeen recognized by LexisNexis Martindale-Hubbellas one of Southern California’s Top Rated Lawyers.

Kenneth LynchRegional Vice President

United Franchise Group

KEN Lynch has over 20 years of sales andsales management experience in a vari-ety of senior sales management roles in

retail and direct sales and is currently theRegional Vice President for The UnitedFranchise Group, a position he has held sinceOctober of 2013. United Franchise Group’sbrands include: Signarama, EmbroidMe,Transworld Business Advisors, Plan AheadEvents, SuperGreen Solutions and experimac.Lynch is responsible for growing these brands inthe California region.

Previously, Lynch was the Regional SalesManager (West Coast) for Kaleidescape, an AVsoftware integrator and manufacturer of highquality movie servers. Before that, he was theVice President of Sales for the world’s largest ver-tical manufacturer of bedding goods, BannerBedding, based in Redlands.

Ryan PatelVice President, Global

Business & Real Estate

Development

Pinkberry

RYAN Patel serves as the Vice President ofGlobal Business & Real EstateDevelopment for Pinkberry, one of the

fastest growing retail brands globally. Since Patelcommenced at Pinkberry in 2011, the companyhas gone from less than 95 locations to over 260stores across 21 countries and continuing toexpand.

An expert in growing brands, Patel hasworked for publicly traded to private compa-nies, and has helped build corporate to fran-chise stores throughout the retail to food seg-ments, both domestically and internationally.

Prior to joining Pinkberry, Patel worked forWet Seal Retail, Inc, Jamba Juice, BJ’sRestaurants, Inc and Panda Express. He receivedhis Bachelors from University of California,Berkeley and received his MBA from the PaulMerage School of Business at University ofCalifornia, Irvine.

Antonio PizanoDirector of Business

Lending - West

Valley Economic

Development Center

AS VEDC’s Director of Small BusinessLending – West, Antonio Pizano man-ages the organization’s Small Business

Lending and SBA Community AdvantageProgram in the Western half of the United States.Pizano has also managed VEDC’s PacoimaDevelopment Federal Credit Union where heoversaw all operations including budget, assetgrowth, collections, regulatory compliance, andthe administration of all loan programs, includ-ing its SBA 7(a) loan program. During his threeyears at the credit union, he more than doubledthe credit union’s asset size and increasedincome by nearly three times.

Prior to joining the credit union in 2009,Pizano held the position of Program Directorfor the San Fernando Valley FinancialDevelopment Corporation (SFV-FDC) where heoversaw the California Small Business LoanGuarantee Program and SBA 504 commercialreal estate loan program.

William Rodriguez, CFE President & Co-Founder

Silvercrest Advertising

W HEN advertising industry veteranWilliam Rodriguez launched LosAngeles-based Silvercrest Advertising

in February 2011, he knew he was on to some-thing special – but had no idea that the compa-ny would evolve into the personalized, innova-tive, one-stop media solution that it has becomefor franchisors/franchisees, resellers, affiliatesand independently owned local businessesaround the world. Leveraging national marketing technology on alocal level, Silvercrest’s state-of-the-art LocalizedAutomation Platform (LMap) allows end usersto design, execute and fund personalized, geo-targeted advertising tactics. Currently being uti-lized by 25 different brands and more than10,000 end users, LMap’s flexible, user-friendlyplatform is just as effective for organizations aslarge as Quiznos as it is for smaller franchisorslike Robeks Premium Fruit Smoothies and non-brick-and-mortar, service-oriented businesseslike House Doctors.

Larry SchwartzDirector & Senior Consultant,

Franchise Services Group

RBZ LLP

L ARRY Schwartz has more than 24 years ofcorporate and business developmentexperience and has held executive level

positions in the ancillary healthcare and fran-chise industries. During that time, he has beeninstrumental in developing and managing newbusiness ventures and has spearheaded thegrowth of several start-ups, early and middlestage companies. Since 2009, he has worked as asenior level consultant to the franchise industryand has helped facilitate the development of sev-eral start-up, early stage and established fran-chise organizations.

He joined RBZ to spearhead the firm’sFranchise Services Group and to pursue his pas-sion for working with companies to developnew and existing concepts, create new businessopportunities and facilitate the growth anddevelopment of regional, national and interna-tional franchise systems.


By BARRY KURTZ

F RANCHISING is a flexible, tried andtrue method of distributing prod-ucts and services and offers busi-

ness owners an alternative avenue toexpand their already successful business-es. One immediately thinks ofMcDonalds or 7-11 when the word “fran-chise” comes up, but there are literallythousands of franchise programs to con-sider in almost every line of commerce.

While most people have a generalsense of the structure of the franchisemodel, particularly because of their first-hand experience dining at a fast foodrestaurant, few realize the breadth ofbusinesses that successfully employ themodel, despite their interaction withthese businesses on a daily basis.

Businesses that are commonly fran-chised that are not obvious to the con-suming public include accounting busi-nesses, insurance agencies, tax prepara-tion services, frozen yogurt businesses,children’s clothing stores, flower shopchains, gasoline stations and weight lossclinics. Some less common, yet innova-tive examples include custom closetdesign services, plumbing related busi-nesses, pool cleaning businesses, pet sup-ply and pet grooming businesses, beerand wine distributorships, golf and tennistraining programs, health care clinics andsenior care facilities, art stores, pest con-trol businesses and janitorial businesses.The possibilities are endless!

Franchising is not right for all busi-nesses. Franchises are highly regulated,and starting a franchise requires theinvestment of a lot of heart and soul, as

well as a lot of time and money. Businessowners must do their homework beforedeciding to franchise. This starts withunderstanding what by law constitutes afranchise and what steps must be takenbefore a business owner may offer theconcept for sale.

Under California law, a business rela-tionship is a franchise if:

The business will be substantially asso-ciated with the franchisor’s trademark;

The franchisee will pay a fee, directlyor indirectly, to the franchisor for theright to engage in the business and usethe franchisor’s trademark; and

The franchisee will operate the businessunder a marketing plan or system pre-scribed in substantial part by the franchisor.

Franchising is regulated at the federallevel by the Federal Trade Commission(FTC) which requires franchisors to pre-pare a franchise disclosure document(FDD) that complies with the FTC’sFranchise Rule.

In addition, 13 states, includingCalifornia, have enacted franchise lawsthat require franchisors to register theirFDD before offering franchises withintheir states. An FDD is an offering

prospectus, that must be written in plainEnglish and provides prospective fran-chisees with information pertaining to 23specific items about the franchisor andthe proposed franchise. The FDD mustinclude, among other things, backgroundinformation about the franchisor and itsexecutives, fee and cost information,samples of the contracts franchisees will

sign, and information about the fran-chisor’s trademarks and patents.Franchisors must also include auditedfinancial statements in its FDD.

Once a business owner is familiar withthe legal requirements of starting a fran-chise, he or she should take a good, hardlook at his or her business to decidewhether it is right for franchising.Franchisors must be able to sell franchis-es, so their franchises must be attractiveto prospective franchisees.

A franchise is attractive if it is based ona concept that is sustainable in the mar-ketplace. Franchises based on fad productsor services rarely survive. To be sustain-able, the concept must be unique enoughto withstand competition, should be easi-ly taught to others, should be adaptableto varying markets, should have success-

ful operating procedures that potentialfranchisees are willing to pay to learn,and should be profitable for both thefranchisor and its franchisees. The advan-tages to becoming a franchisee include:● The greater likelihood of success from

membership in a proven system ratherthan in a new business model and animmediate customer base for a knownbrand name with an already-estab-lished market presence.

● The power of collective group pur-chasing, internal marketing materials,professional oversight of the business,new product research and develop-ment and continuing education andtraining.

● Support from a franchisor and like-minded co-franchisees with similargoals, needs and pressures.

● Franchising is a proven means for suc-cessful businesses to expand, butchoosing to franchise one’s business isa decision that must be well consid-ered. Understand the costs involvedand the steps you must take beforebecoming a franchisor. Considerwhether the business model will beattractive to potential franchisees andsustainable in the face of competition.And as a friendly reminder, check withan experienced franchise attorney tohelp you through the process.

Barry Kurtz is the Chair of the Franchise andDistribution Practice Group at LewittHackman in Encino, and a CertifiedSpecialist in Franchise & Distribution Law,designated by the State Bar of CaliforniaBoard of Legal Specialization. Contact himvia email: [email protected].

By LARRY SCHWARTZ

FRANCHISING has experienced a rad-ical transformation over the past5 decades. Today, it is a thriving

and dynamic industry that has evolvedfrom what was once a restaurant centricexpansion strategy to a major compo-nent of the U.S. and world economy.The franchise marketplace is represent-ed by hundreds of industry segments,several thousand brands and con-tributes more than $839 billion in eco-nomic output.

Like the majority of the U.S. econo-my, the franchise industry was severelyaffected by the recessionary period of2008-2011, during which time businesscapital was virtually non-existent andnew business development came to anabrupt halt. However, the very circum-stances that overwhelmed an industrysimultaneously established the founda-tion for its growth.

With so many people losing confi-dence in the perceived stability of cor-porate America as well as having experi-enced devastating losses in real estateand securities markets, franchising hasemerged as a viable alternative for peo-ple to become entrepreneurs. Owning afranchise gives the business owner morecontrol over their financial future while

providing the security of operatingproven brands and business models. Asa result, the franchise industry is flour-ishing and is expected to continueflourishing into the foreseeable future.

Industry experts are confident thatthis is not simply a reactionary trend,but a permanent shift toward lower riskentrepreneurship. This has led to stronggrowth among established franchiseorganizations and has prompted othersuccessful business owners to considerfranchising as a viable strategy toexpand their existing business.However, franchising comes with itsown set of rules. The industry is highlyregulated and its unique operationalrequirements must be understood.

For new and early-stage franchiseorganizations, it is important to seekout industry professionals that can pro-vide a “turn-key” consulting and advi-sory package to help establish the fran-chise. It is important to find a consult-ing firm that has extensive resources,which includes an experienced supportteam and an established network ofindustry professionals to help developall the key components of the franchisesystem.

Building and managing a successfulfranchise system requires significantinsight about all aspects of the industry.

What is the historical landscape? Whatare the current trends in the franchiseindustry? Have each of the many com-ponents required to operate the busi-ness been considered? These are ques-tions that any business owner must askthemselves. While building a franchisesystem relies upon some of the samebasic concepts that are ubiquitous toany well run organization, franchisingcertainly changes the game.

Some of the components that arecritical to building a successful franchiseinclude defining how corporate andunit level operations are to be handled,developing a strong branding and mar-keting strategy, and providing the sup-port/training needed for franchisee suc-cess. Franchise sales are always a hottopic. So the question must also beasked (and answered) as to how saleswill be generated.

In addition, several major painpoints can affect the franchisor/fran-chisee relationship. For example, finan-cial reporting on which royalty calcula-tions are based is often inaccurate andinconsistent. Lack of accurate financialdata and key performance indicatorscan have a negative impact on the notonly the individual franchise but thefranchise system as whole. Don’t leavethis important function up to interpre-

tation. Include a technology platformthat standardizes accounting and finan-cial practices within the overall plan.This can go a long way towards avoid-ing this pitfall.

A successful franchise system canbe very profitable for both the compa-ny and its franchisees. Building theright team of advisors is the corner-stone of the foundation on which asuccessful franchise system is built.Success depends on a strong relation-ship between the franchisor and fran-chisee. The franchisor must be com-mitted to investing the time andresources necessary to build a strongsystem infrastructure and provideongoing support to their franchisees.The franchisee must be willing toadopt the culture established by thefranchisor and effectively execute theobligations not only to their newbusiness but to the franchise systemas a whole.

Larry Schwartz is Director & SeniorConsultant at RBZ Franchise ServicesGroup.For questions about this article or formore information as to how the RBZFranchise Services Group can help providethe right team and the right tools, contactSchwartz at (310) 478-4148 x5759 or [email protected].

Is Franchising the Right Model for Your Business?

Building a Successful Franchise

SEPTEMBER 29, 2014 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL 53


Franchising is not right for all businesses. Franchises arehighly regulated, and starting a franchise requires the

investment of a lot of heart and soul, as well as a lot of timeand money.Business owners must do their homework beforedeciding to franchise. This starts with understanding what by

law constitutes a franchise and what steps must be takenbefore a business owner may offer the concept for sale.



Setting Yourself Up for Success: Some Legal ConsiderationsBy ALISON CONLON

T HERE are many legal avenues tobring products and services to mar-ket in the United States and

abroad. Three primary avenues arethrough franchisees, distributors, and salesrepresentatives. Understanding the legaldifferences between the three will maxi-mize your opportunity to best set up yourrelationship and obligations. Listed beloware important questions to consider.

1 – What is our legal relationship?

First, consider whether you are tryingto bring your product or service to mar-ket through a franchisee, distributor orsales representative. Although state lawsvary in their precise definitions, theserelationships can generally be describedas follows:

A franchisee is a selling entity that usesthe franchisor’s trademarks; has a com-munity of economic interest with thefranchisor; and pays a franchise free tothe franchisor. In other words, the fran-chisee pays the franchisor a fee for thebenefit of using its system and brand,and the franchisee profits from sellingproducts under the system and brand.

A distributor is a selling entity that pur-chases products from the supplier; takespossession and title of products; thenresells them. The distributor makes aprofit from reselling products at a higherprice than he paid to purchase themfrom the supplier.

A sales representative touts the suppli-er’s products to customers and placesorders which the supplier fills. The sup-

plier pays a percentage of the sales pro-ceeds to the representative.

2 – Why does the legal relationship matter?

Defining your legal relationship isimportant for many of reasons. From abusiness perspective, the definition willhelp identify and manage each party’sexpectations. From a legal perspective,many states have enacted protective lawsrelated to franchises, distributorships andsales representatives. Depending onwhere you do business, certain state lawprovisions may govern your relationshipirrespective of your contract. Awarenessof these state laws and how they apply toyour relationship at the onset will mini-mize the potential for disputes later inthe relationship.

Franchises: Many states have protectivelaws for franchise relationships. The lawsgenerally require the disclosure and regis-tration of franchises with the state.Typically, the laws require the franchisorto have good cause to terminate a fran-chisee. Different states identify differentgrounds for good cause. Knowing thegrounds for cause and incorporatingthem into your agreement may providesignificant protections if you later wish toend the relationship.

Distributorships: Depending on the typeof industry and products at issue, manystates have enacted statutes protecting dis-tributors. Such regulations are common inthe alcoholic beverage, motor vehicle,and agriculture industries, among others.Certain statutes require good cause for asupplier to terminate a distributor andusually require the supplier to repurchase

the distributor’s inventory.Sales representatives: Most states have

statutes protecting sales representatives.These statutes usually require suppliers tohave written contracts specifically defin-ing the formula for and timing of com-mission payments. With limited excep-tions, these statutes generally do notrequire good cause for termination. Somestates have strict requirements for docu-menting commission, which may not bea problem in principle, but heightens therisk of liability for innocent glitches inadministrative procedures.

3 – What should the contract say?

The next step is to create a writtenagreement that addresses your businessissues and anticipates the impact of appli-cable laws. Many such laws may trumpyour private contract provisions.

Key provisions include the date; dura-

tion; duties; insurance; indemnity; use ofintellectual property and confidentialinformation; termination requirementsand procedures; territory; price and pay-ment; and dispute resolution.

If you are establishing a sales networkin different states with different laws, youcan still use a form agreement so long asit acknowledges these variations. Anexample is: “This is a general form ofAgreement used in several states in theUnited States and any provision in itwhich in any manner contravenes thelaws of any state shall be deemed not tobe a part of this Agreement.”

4 – Do I need a lawyer?

There are many different ways tostructure your relationship with the peo-ple who will help you bring your productor service to market. Up front, it is bestpractice to engage a lawyer to guide youin defining the relationship and prepar-ing a written agreement that anticipatesstate law protections. A modest invest-ment in this professional advice at thefront end of this relationship will providemaximum protections down the road.

Alison Conlon is a partner in the Chicagooffice of Barnes & Thornburg LLP and co-chair of its Commercial Litigation PracticeGroup. She specializes in helping clientsmanage their sales and distribution chan-nels and systems. Barnes & Thornburg attor-neys represent established and early-stagefranchisors, master franchisees and areadevelopers. We have experience craftingstrategies to encourage and protect your fran-chising interests.


Depending on where you do business, certainstate law provisions maygovern your relationship

irrespective of your contract.Awareness of these state

laws and how they apply toyour relationship at theonset will minimize the

potential for disputes laterin the relationship.

Top Five Legal Tips For Franchisors In 2014

By SUSAN A. GRUENEBERG,ELIZABETH M. WELDON, JOSHUASCHNEIDERMAN and LULU Y. CHIU

T HIS has been an active year forfranchising. The reach of franchis-ing as a method of product and

service distribution continues to grow.Entrepreneurs considering expansionthrough franchising and seasoned fran-chisors alike may benefit from exploringissues that have surfaced in franchisecases this year and raise questions such as:● Do you provide for unnecessary con-

trols over the way your franchiseesconduct their businesses? An affirma-tive answer can lead to frighteningconsequences including vicarious lia-bility for franchisees’ acts. According torecent announcements by the NationalLabor Relations Board, it may also leadto becoming the joint employer ofyour franchisees’ personnel.

● Is your non-competition clause enforce-able? State laws vary greatly on thisissue, especially after the franchise rela-tionship is over. The last thing you wantis a former franchisee competing withexisting franchisees in the same territoryif the situation is possible to prevent.

● Does your Franchise DisclosureDocument contain a closing question-naire for franchisees to complete soyou can prove that the sale compliedwith franchise laws? You may thinkthat the best answer to this question is“yes.” Not so fast. It may be moreeffective to document compliance withfranchise laws if the parties acknowl-edge in the Franchise Agreement itselfthat correct procedures were followed.

● Is your franchise sales team up to dateon compliance with franchise saleslaws? You may think the fact that NewYork and Rhode Island still require dis-

closure at the first personal meetingwith a prospective franchisee is a meretechnicality. But failure to complywith all of these “technicalities” offranchise laws can expose a franchisorto the threat of damages and rescis-sion, or even personal liability on partof its control persons.

● Have you decided that licensing is thebest way to avoid the regulation andexpense of franchising? Beware. Even ifyou call your program a “license” or a“certification program,” it is a franchise ifit contains the three elements of the defi-nition of a franchise (two elements inNew York!) The three elements to lookfor are (1) payment of a fee; (2) associa-tion with a name or symbol of the fran-chisor; and (3) significant control or assis-tance with the operation of the business.

Snell & Wilmer’s team of franchiselawyers can assist in analyzing these andother issues that arise in administering afranchise program. The firm helps clientsstructure and document franchise andrelated agreements, as well as complywith disclosure requirements in theUnited States and internationally. Thefirm’s intellectual property group assists

franchisors with protection of trade-marks, trade secrets and patents.

We have immigration attorneys whocan assist with visa issues that may arisewith franchisees or with franchisor person-nel travelling abroad. Our dispute resolu-tion group is experienced in representingfranchisors in mediation, arbitration andlitigation of matters involving franchiselaws as well as intellectual property issues,general commercial disputes, bankruptcyand receivership concerns and antitrustmatters. Our appellate group has beeninvolved in significant cases, and mostrecently acted as lead counsel for Domino’sin Patterson v. Domino’s, which was decid-ed by the California Supreme Court.

Snell & Wilmer’s team of franchise lawyersincludes:Susan A. Grueneberg, Partner, Los Angeles,(213) 929-2543, [email protected]; Elizabeth M. Weldon, Partner, OrangeCounty, (714) 427-7461, [email protected]; Joshua Schneiderman, Partner, Los Angeles,(213) 929-2545, [email protected]; and Lulu Y. Chiu, Associate, Los Angeles, (213)929-2548, [email protected].

The reach of franchisingas a method of product andservice distribution contin-ues to grow. Entrepreneurs

considering expansionthrough franchising and sea-soned franchisors alike may

benefit from exploringissues that have surfaced in

franchise cases this year.



51 68_franchising_guide.qxp 9/24/2014 4:53 PM 5


By ROCHELLE SPANDORF, ESQ.

CONGRATULATIONS! You’ve spent yearsbuilding your business, developinga loyal following, and honing your

operations into a replicable format. Youown two, three or maybe ten differentlocations, all profitable, and understandyour business inside and out. You knowthe right demographics and cost to jump-start new locations. You’ve cultivated reli-able supply relationships, built a loyalmanagement team, and learned to dele-gate daily details. Over the years, you’veturned away numerous inquiries aboutfranchising while you’ve built your repu-tation and financial base. Now you’reready to franchise and you’re determinedto avoid common mistakes.

Not to fear! Here are 5 essential tipsfor launching a franchise programsuccessfully:

● Budget Wisely: Being undercapitalizedis the number one mistake of start-upfranchisors. You’ll incur legal fees toprepare the franchise disclosure docu-ment (FDD) and franchise agreements;more legal fees if you open franchisesin states like California, New York andothers with annual registrationrequirements; accounting fees (fran-chisors must be audited annually); fil-ing fees (to incorporate and completestate registrations); and marketingexpenses to generate initial franchisesales. Smart start-ups buy consultingadvice to prepare realistic financialmodels (franchise terms are often 10years or longer). How much are wetalking about realistically? Figure easily$100,000 or more. It is a mistake tolaunch a franchise program on a shoe-string budget and bank on franchisefees to keep you afloat.

● Assemble a Strong Franchise Team: As afranchisor, you’ll be engaged in entire-ly different activities than running

your business. Your job now is torecruit prospects and train them toreplicate your business model; facili-tate onboarding (the real money infranchising comes from continuingfees, which only start flowing whenthe franchisee opens); advertise toattract consumers and new fran-chisees; support your franchisees bycontinually refreshing the concept andhelping them maximize their results(your easiest next franchise sale is to ahappy existing franchisee); and policeyour brand and enforce your con-tracts. Assemble a strong management

team, and do not assume that you canhandle all launch duties capably whilealso keeping a fulltime schedule run-ning your business.

● Know the Law: Franchise arrangementsare highly regulated. There are elabo-rate federal and state presale disclosureand registration rules for selling fran-chises. State laws may restrict how andwhen you may terminate a franchiseor dictate substantive terms for yourfranchise relationships. Your fran-chisees can’t waive these protectionseven assuming they want to. Violatinga franchise law is a felony in some

cases. Violations may allow franchiseesto recover their business losses andattorney’s fees and rescind their con-tracts. And even though you operateas a business entity, you and yourmanagement may each have personalliability for franchise law violationswhether or not you know about thelaws or intend to violate them.

Franchising is a specialized field oflaw, so hire an experienced franchiselaw expert, one dedicated to trainingyou and your management team onyour legal responsibilities. Steer clear ofgeneral practitioners who have never

written a FDD and franchise consult-ants that offer FDD toolkits or "all-under-one-roof" services including fulllegal documentation. To structure fran-chise relationships properly, hire a full-service law firm that not only offersfranchising expertise, but also knowsyour industry and can coordinate seam-less legal support covering related legalissues like lease control, trademark pro-tection, capital formation, pricing pro-grams, and supply chain issues.

● Show Your Numbers: Companies thatlack a profitable track record shouldnot sell franchises. Given your multi-

unit success, be prepared to shareyour numbers as this is every candi-date’s most probing question.Franchise sales laws forbid you frommaking any representations aboutactual or potential sales, income orprofits of franchise units, unless theinformation is in your FDD. Anexpert franchise law attorney canhelp you craft lawful financial per-formance representations that putyour business’ best foot forward.With 40% of all franchisors todaymaking some type of financial per-formance representation, whatimpression will you make if youdon’t put your numbers in yourFDD? Unless you do, you may notmake financial representations onyour website (the first place prospectscheck for franchise opportunities) oranywhere else.

● Be Selective: Franchising is not anautomatic ticket to success. Smart fran-chising takes considerable pre-plan-ning. Plot your franchise expansionstrategy by considering distance fromyour headquarters. Importantly, don’tsell a franchise to anyone just becausethey show interest in your brand. Beselective. Franchise arrangements arelong-term, and ideal candidates shouldbe capable of operating multiple unitsthemselves. Set appropriate minimumnet worth, liquid capital and experi-ence requirements, and, while youmay be tempted, don’t deviate.

Rochelle Spandorf chairs Davis WrightTremaine’s national franchise practice. Basedin the firm’s Los Angeles office, she is aCalifornia State Bar Certified Specialist inFranchise and Distribution Law and wasrecently recognized by Who’s Who Legal asone of the 10 “Most Highly RegardedIndividuals” in franchise law worldwide, oneof just six U.S. lawyers and the only U.S.woman included in the ranking.


Five Tips To Launching A Franchise Program Successfully

Franchising is a specialized field of law, so hire an experi-enced franchise law expert, one dedicated to training you andyour management team on your legal responsibilities. Steer

clear of general practitioners who have never written a FDD andfranchise consultants that offer FDD toolkits or "all-under-one-roof" services including full legal documentation. To structurefranchise relationships properly, hire a full-service law firm thatnot only offers franchising expertise, but also knows your indus-try and can coordinate seamless legal support covering relatedlegal issues like lease control, trademark protection, capital for-

mation, pricing programs, and supply chain issues.

IT’S always a good time for small busi-ness owners to reassess their company’sfinancial health and their relationship

with their bank. The American BankersAssociation offers the following tips to helpsmall business owners enhance their cur-rent banking relationship or choose thebest bank for their needs.

Many small business owners have beenwondering what it takes these days to get abank loan. One way to influence your bank’sdecision is to establish a personal relation-ship with your banker that shows him or herjust how valuable your business is.

Banks value long-term, profitable busi-ness banking relationships. Bankersreward these firms by extending creditwith the most favorable interest rates.These businesses and their bankersunderstand that developing a meaningfulrelationship is a two-way process—yourbanker has a role to play and so do you.

So how do you know if you have ameaningful and valued relationship withyour bank? To find out, take the following

“relationship test.” Respond to the sevenstatements below with “true” or “false.”

1) My firm has a bank relationshipmanager assigned to our account and wehave contact (by phone or in person) atleast once per quarter to update the bankon recent developments at our firm andwithin our industry.

2) Our bank relationship managerunderstands our industry, our position inthe industry, our firm’s value proposition,where we are today and where we’d liketo be in the future.

3) We provide our banker with updat-ed financial information (historical andprojected balance sheet, income state-ment, cash flow information to includeprojection assumptions and commentaryon actual performance) regarding ourprogress toward achieving our goals on atimely basis.

4) Our senior management teammeets annually with our relationshipmanager and his/her boss to discuss ourfirm’s financial performance and chal-

lenges and to understand the bank’s per-ception of our performance.

5) Our relationship manager proactive-ly brings us ideas to help us achieve ourgoals.

6) We understand how the currenteconomic crisis has affected our bank andour relationship with the bank (i.e., theavailability of credit to our firm and thesafety of our deposits).

7) Our firm makes sure that ourbanker is aware of all of our businesswith the bank (e.g., both business andpersonal) and that it makes money onour total banking relationship. In addi-tion, our firm provides our banker withreferrals to other profitable businesses.

If you were able to respond “true” to allseven of these statements, you have posi-tioned your firm well with your banker.

If you answered “true” to five or six,you still have room for improvement indeveloping a meaningful dialogue withyour banker and benefiting from his orher advice and counsel.

If you answered “true” to four or fewer,you have not positioned your firm wellwith your banker and are putting your firmat a competitive disadvantage in terms of:

• receiving the funds you need togrow and prosper;

• obtaining the best rates available forthe financial products and services yourbusiness needs to operate; and

• receiving “ideas and advice” to helpyou achieve your desired business goals.

Your firm should seek a bank thatrewards a relationship approach to doingbusiness with them, and a banker who isable to give your firm the financial advicethat it needs to survive and thrive intoday’s ever changing economy. Inreturn, your firm should reward this bankwith your business and loyalty.

The American Bankers Association representsbanks of all sizes and charters and is thevoice for the nation’s $14 trillion bankingindustry and its two million employees.Learn more at aba.com.

How Small Business Owners Can Assess Their Banking Relationships



VEDC is a leading non-profit smallbusiness lender that is changingthe way small business lending

gets done by making it more available,sustainable and impactful. As a certifiedCommunity Development FinancialInstitution (CDFI), VEDC’s mission is tohelp create jobs and promote economicdevelopment in under-served communi-ties. They provide loans and micro-financ-ing options to small businesses, particular-ly those owned by women and minori-ties, that don’t quality for traditional bankfinancing.

From their headquarters in theGreater Los Angeles area, VEDC has sup-ported small business owners for 38years with the goal of creating and sus-taining jobs and businesses by providinghigh-quality small business developmentservices. Founded in 1976, the organiza-tion’s mission has expanded in order torespond to the financial assistance anddevelopment needs of entrepreneursconducting business in low to moderate-income communities.

VEDC believes that the major barrierfor today’s small business is access to capi-tal. Without adequate financing, manysmall businesses are prevented from thriv-ing. That is why VEDC focuses its effortson lending and guiding small businessesto achieve growth and sustainability.Their interest is to get loan funds in thehands of minority and low-income bor-rowers so that businesses can be created,maintained, and expanded.

In fact, VEDC has been instrumentalin helping to create economic opportu-nities in underserved areas for thosewho want to improve their financialstandards and build stronger communi-ties. The organization has assisted morethan 98,000 businesses in creating andretaining over 27,000 jobs, openingover 1,700 new businesses, and graduat-ing more than 3,100 individuals fromthe Entrepreneurial Training Program.VEDC has also provided more than$360,000,000 in direct and guaranteedlending to small businesses. Historically,75 % of VEDC clients are located inlow- to moderate-income areas and 65%have been minority and women entre-preneurs.

VEDC also sponsors the San FernandoValley Financial DevelopmentCorporation (SFV-FDC) a not-for-profitcorporation dedicated to the growth andjob creation of small and medium sizedbusinesses. The SFV-FDC administers theSBA 504 and California Small BusinessLoan Guarantee Program.

The California Loan GuaranteeProgram enables a small business toobtain a term loan or line of credit whenit cannot otherwise qualify for a loan. Theprogram provides a lender with the neces-sary security, in the form of a guarantee,to approve a loan or line of credit. TheSBA 504 Loan Program is an alternativeform of financing created to providefinancing at a low cost, fixed rate financ-ing for small businesses looking to pur-

chase commercial real estate or machin-ery. These programs enable business own-ers to continue expanding and growingtheir businesses.

It has been proven that a combinationof technical assistance, access to capitaland partnerships with local workforce andbusiness assistance agencies are critical toentrepreneurial success which is whyVEDC offers training and financial servic-es. The success of small businesses andthe creation of jobs is the key ingredientin developing healthy and sustainablecommunities.

VEDC has consistently providedservices to small and medium sizedbusiness owners, entrepreneurs andmembers of the communities theyserve. Locally, the organization operatesa Small Business Administration (SBA)sponsored Women’s Business Center,SFV-FDC, Pacoima DevelopmentFederal Credit Union, and two LosAngeles Business Source Centers. Thecombination of these successful pro-grams, that anticipates the needs ofgrowing businesses in an ever-changingeconomy, has created a focused visionof economic opportunity, effectiveorganization of resources, and the fos-tering of job creation.

VEDC offers a core of free businessworkshops and each year over 5,000 smallbusinesses access these services. TheirBusiness Services Division offers entrepre-neurs the tools they need to succeed inbusiness with access to consulting and

training to business owners and VEDCloan clients as part of an ongoing strategynot only to help people start a businessbut to assist them with capacity buildingand growth strategies.

The organization offers a wide range oflending and training services in the LosAngeles area including:

Business Loan Programs

● Microloan Programs in amounts rang-ing from $1,000 to $50,000

● Small Business Loan Programs inamounts ranging from $50,000 to$700,000

● SBA 7(a), including CommunityAdvantage, in amounts up to$2,000,000

● SBA 504 Commercial Real Estate LoanProgram

Business Services and Training Programs

● SBA Sponsored Women’s BusinessCenter in Van Nuys, CA

● Two City of Los Angeles BusinessSource Centers located in Pacoima andReseda

● Microenterprise and EntrepreneurialTraining Programs

● Travelers Small Business Risk EducationProgram

VEDC’s expanding portfolio is composed ofcommunity-based loan funds in Los Angeles,Chicago, San Francisco, Las Vegas, Reno, SaltLake City and the New York Tri-State area.For more information visit www.vedc.org.

What the VEDC Can Offer Small Businesses



By ANTHONY J. MARKS andR. ANDREW CHERECK

BUILDING a brand takes capital. Thiscapital often often comes from: (1)self-funding from existing cash flow;

(2) third-party equity investment in stockor other securities; or (3) third-party lend-ing. Franchising or licensing, however, aretwo additional sources of capital that facili-tate brand building using other people’scapital, without having to give up owner-ship or grant security interests in one’sbusiness assets

Franchising , at its core, is a trade-mark, trade secret and “know-how”license. Whether or not the agreement isa “franchise” is a legal determinationbased upon the presence of the “ele-ments” of a franchise. Generally speak-ing, there are three fundamental ele-ments of a franchise. First, the franchiseetypically adopts the business format ofthe franchisor and identifies its businesswith the franchisor’s trademarks. Second,in exchange for the right to utilize thefranchisor’s trademark and adopt its busi-ness model, the franchisee pays a fran-chise fee of $500 or more to the fran-chisor (or a person affiliated with thefranchisor) at any time before or withinsix months after the business opens.Finally, the franchisor will either providea marketing plan, exert or have theauthority to exert significant control overthe franchisee’s method of operation, orprovide significant assistance in the fran-

chisee’s method of operation.The franchise model allows for the

franchisor to raise capital (and thusexpand its brand) through multiple fran-chisee generated revenue streams, includ-ing initial franchise fees, royalty pay-ments, marketing fund fees, rebates fromsuppliers, and product and inventory salesto franchisees. In return, the franchisor isable to expand its brand by harnessingthe enthusiasm and capital of an entre-preneurial franchisee with a passion forthe brand and method of operation.Franchising has the added benefit ofallowing franchisors to stage growth andexpansion through reserving and grantingexclusive territories. Franchising alsoallows for international expansion andexpansion into highly controlled venues,such as airports and stadiums, earlier thanis typically afforded to developing brands.

The success of the franchise model isgrounded in the franchisee-entrepreneurbeing able to successfully replicate thefranchisor’s proven business model.Franchisors, therefore, cannot simply sitback and collect fees. In addition to hav-ing to ensure compliance with federal andstate registration/disclosure and relation-ship laws, franchisors must continue tosupport their franchisees and grow theirfranchise system through innovation andtraining, managing system supply chainand costs, and developing successful mar-keting programs and strategies.

Licensing offers brand owners a wayto grow brands in different channels of

distribution, while avoiding the rules andregulations governing franchises. Likefranchising, licensing allows the brandowner to collect a royalty or other fees onthe sale of its branded products or servic-es by third parties. It is most frequentlyseen when the brand owner wants toexpand into product lines that it doesnot have the capability or desire to pro-duce itself. For example, a clothing brandmay license a third party to make eye-wear under the same brand. Similarly, anapparel company my license an experi-enced retailer to develop shops exclusivi-ty dedicated to the apparel brand.

However, the license arrangement is fre-quently a trap for the unwary. In order toavoid the franchise laws mentioned above,one of the above elements of a “franchise”must be avoided. This is not always easilyaccomplished. The typical license agree-ment provides for a trademark license inexchange for payment of a fee. Further,because trademark licensors desire to con-trol, and Federal trademark law requiresthem to control, the use of the trademark,

it is difficult to avoid the “marketing plan,”“significant control,” or “significant assis-tance” element. That said, with the properbusiness and legal planning, there are waysto structure a non-franchise license. Forexample, in the context of branded prod-uct distribution, the fee element may beeliminated in most jurisdictions if thelicensor only sells the licensee reasonableamounts of inventory at a bona fidewholesale price. Yet, in many instances,the brand owner is wise to avoid the legaluncertainties and costly risks associatedwith trying to avoid the franchise laws andimplement the franchise business modelfor its brand expansion.

Finally, franchising and licensing canbe used in tandem with other capital rais-ing through friends, family, venture capi-talists, private equity and others. Thus, afranchisor could develop “corporate”locations through equity financing, whilepursuing other business lines throughfranchising or licensing.

Franchising and licensing are not rightfor all businesses, but for the right brandthey provide advantageous alternatives tomore traditional financing methods.

Tony Marks and Andrew Chereck are attorneysat the law firm of Bryan Cave LLP in SantaMonica, California. Both Tony and Andrew areCertified Specialists in Franchise andDistribution Law, by the State Bar of California- Board of Legal Specialization. Contact themvia email at [email protected], [email protected].

Building Brands Through Franchising and Licensing


• MICROLOANS$1,000 - $50,000

• SMALL BUSINESS LOANS$50,000 - $700,000

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Real Money. Real People. Real Jobs.


Franchising and licensingare not right for all businesses,but for the right brand theyprovide advantageous alter-natives to more traditional

financing methods.



By RYAN PATEL

BEING a franchisee today no longerresonates with the past perception ofbeing associated as a “mom and

pop” operation. Franchisee groups areincreasing its sophistication to not justbuilding a few stores but looking to build aportfolio of brands across different sectors.In the midst of the growth stage of buildingmore stores and brands simultaneously, the

foundation of the organization will be test-ed. Being involved and providing supportto different sizes of franchisee groups overthe years has really led me to appreciatehow the most successful franchisee organi-zations continue to do the little things thatstrengthen the organization’s foundation,such as building teams and staying true toinitial core values. In today’s world, there isa lost art of empowering and retaininggood talent, especially since there has beenan emphasis on cross-functional teams.These teams have become a necessity inorder to keep up with the sophisticatedmarket and consumer demands. With thisin mind, where do you start?

Build People. This is not just a slogan

or a statement to be repeated like amantra but genuinely needs to beinstilled and practiced by everyone in theorganization. What will happen whenthe chaotic growth starts? There will bemore procedures, products, customers,new challenges and obstacles with quick-er deadlines. Who will accomplish thesethings? Your team. As seen among thesuccessful franchisee groups, growing andtraining your team members lead to astronger foundation for the organization.

Many franchisees directly communi-cate and develop growth plans for eachof their team members. This providesmotivation and a goal-orientated atmos-phere for the team. Team members willknow exactly where they stand and whatto do in order to grow further within thecompany. The most successful franchiseegroups take the time and sit face-to-face,one-on-one with each team member. Bytruly understanding what your teammembers’ aspirations are, you can helpthem obtain it while at the same timeachieving the goals of the company.

Training is a vital element and basisfor developing team members through-out the entire organization. One of themost common practices among the mostsuccessful franchisee groups was thatthey were sending their managers andteams members to training again. Thetraining was to either to the franchisorfor a refresher course or to their owntraining store. Obviously, from the out-side, this sounds like a cruel punishment

of being re-trained but in actuality, re-training is a great way to ensure the basicfoundation stays strong but also growstronger in new areas. Re-training canbring in new ideas and create more effi-cient processes by replacing old habitsamong the teams. For example, theremay be something that was brought backby the team member from re-trainingwhich can implemented to the companythat will make things either more effi-cient or save money. Additionally, re-training provides the organization anopportunity to invest, empower andinstil core values in its people who in

turn shapes the growing brand. There are several ways to strengthen

your company’s foundation, but themain essential building block is to trainbetter and build stronger people. Withthat said, it sounds very easy; however, ittakes dedication and commitment, evenduring the busy growth period, fromeverybody to accomplish this. Just bylooking at your teams can provide thatbarometer within your company to see ifyou are living up to your core values.

Ryan Patel is Vice President, Global Business& Real Estate Development for Pinkberry.

Strengthening the Foundation: Build People

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Training is a vital elementand basis for developing

team members throughoutthe entire organization.


By WILLIAM RODRIGUEZ, CFE

INTERESTED in reaching out to thecustomers in your area, but notsure how to go about it? Want to

offer them personalized, time-sensitivepromotional offers, but uncertainwhere to start? Confused about thewhole local marketing process?

You’re not alone. Running your ownbusiness is exhilarating and exciting,but it can also be exhausting and over-whelming. And after a long day of jug-gling staffing, customer service, inven-tory, IT, product and accounting issues,who has the energy and enthusiasm toeven think about – much less, execute– a targeted local marketing campaign?

That’s where a marketing portal – ormedia automation platform, such asLMap offered through SilvercrestAdvertising – can help. The key is tofind the right partner who understandsthe franchising arena, provides simpleexplanations, features a user-friendlysystem, and – critical for every success-ful business – offers significant cost sav-ings on the media vehicles and adver-tising tactics used.

Here are a few things to look for:

The best things in life are free.

The media automation platformshould not charge you to use their sys-tem. Naturally, there will be costs asso-ciated with purchasing media to dis-

tribute your promotions, but thereshould be no fee for choosing your tac-tics, selecting the zip codes that you’dlike to reach or designing your creativematerials.

Everything you want – all in one place.

You should be able to design a vari-ety of advertising tactics by logginginto and utilizing one portal.Whether you’re using door hangers,newspaper ads, direct mail, free-stand-ing inserts, brochures or businesscards, you’ll appreciate the one-stopconvenience of doing everythingwithin the same system. And from abottom-line perspective, you’ll realizeappreciable savings by taking advan-tage of the frequency or volume dis-counts inherent in such consolidatedbuying power, as opposed to buyinglittle pieces of your local media planfrom multiple vendors.

Keep it simple.

Because we’re not all graphic design-ers or computer experts, the mediaautomation platform should be intu-itive, accessible and above all, user-friendly. It should give you the abilityto design pieces easily and efficiently,while adhering to franchisor advertis-ing guidelines and requirements.Franchisors should be able to load pre-approved templates and promotionsinto the portal – again, at no cost – giv-ing you a literal menu of offerings

from which to “click and pick”. Youthen just “drag and drop” the promo-tion(s) that you’d like to extend toyour customers into the template. Easyand fast.

Maximize your message.

To get the most “bang for yourbuck” within your geographic area,you’ll want to reach as many cus-tomers as you can by spreading youroffer across multiple marketing chan-nels. A true one-stop media automa-tion platform allows end users to cre-ate print ads, billboards, solo mailpieces, business letterhead – and more– from one intuitive, user-friendlyportal. This saves money by bundlingeverything under one roof, and savestime by not having to deal with mul-tiple contacts within several organizations.

Don’t sweat the small stuff.

Different vendors have differentrequirements. Newspapers may man-date different minimum quantitieson different days of the week, aswell as different zone or even full-run stipulations. With door hangervendors, deliverable vs. non-deliver-able areas come into play, whereascarrier route data and P.O. boxes arekey for Every Door Direct Mail(EDDM). Rather than try to keep upwith these ever-changing parame-ters, find a media automation plat-

form that keeps abreast of develop-ments in the dynamic media arenaand can make the best recommenda-tions for your business.

Pay only for purchase.

The final step in utilizing a mediaautomation platform is check-out andexecution. Find one that allows you topay for the media outlets selectedimmediately using a credit card, soyou’ll have the peace of mind ofknowing that the distribution of theadvertising tactics you designed andfunded will be executed seamlesslyand without anything more requiredon your part.

When it comes right down to it,executing the perfect local marketingplan can be as simple as choosing theperfect marketing partner. A one-stopmarketing portal, or media automa-tion platform, can save you time,money and headaches while givingyou the ability to get a compelling,impactful promotional message in thehands of the people you want toreach – your customers. What morecan you ask?

William Rodriguez is President andFounder of Silvercrest Advertising, a LosAngeles-based advertising agency that pro-vides cutting-edge, customized marketingsolutions for franchisees and franchisors.For more information, visit www.silvercrestadvertising.com

The Top Six Things to Look for in an Online Marketing Portal


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WANT to be your own boss, butnot willing to take on the riskof starting your own business

from scratch? Franchising can be a greatalternative if you want to have someguidance in the start-up phase of thebusiness.

A franchise is a business model thatinvolves one business owner licensingtrademarks and methods to an independ-ent entrepreneur. Sometimes, franchisesare referred to as chains. There are twoprimary forms of franchising:

• Product/trade name franchising

Franchisor owns the right to thename or trademark and sells thatright to a franchisee

• Business format franchising

Franchisor and franchisee have anongoing relationship, and the fran-chisor often provides a full range ofservices, including site selection,training, product supply, marketingplans and even assistance in obtain-ing financing

• Before Investing in a Franchise

Before you decide to franchise, youneed to do your research. You couldlose a significant amount of moneyif you do not investigate a businesscarefully before you buy. By law,franchise sellers must disclose cer-tain information about their busi-ness to potential buyers. Make sure

you get all the information youneed first before entering into thisform of business.

To learn more about franchisingopportunities, visit Federal Trade

Commission Bureau of ConsumerProtection.

The decision to purchase a franchiseinvolves many factors. To help youexplore if franchising is right for you,consider the following questions:

• Do you know how much you can

invest?

• What are your abilities?

• What are your goals?

Franchising Strategy

You need a strategy before investing ina franchise. Doing your homework aboutthe franchise first will help you gain asolid understanding of what to expect as

well as the risks that could be involved.• Be a Detective In addition to the rou-

tine investigation that should be con-ducted prior to any business purchase,you should be able to contact otherfranchisees before deciding to invest.

You can obtain a Uniform FranchiseOffering Circular (UFOC), which con-tains vital details about the franchise’slegal, financial, and personnel history,before you sign a contract.

• Know What You are Getting Into Beforeentering into any contract as a fran-chisee, you should make sure thatyou would have the right to use thefranchise name and trademark,receive training and managementassistance from the franchisor, usethe franchisor’s expertise in market-ing, advertising, facility design, lay-outs, displays and fixtures and dobusiness in an area protected from

other competing franchisees.

• Watch Out for Possible Pitfalls: Thecontract between the two parties usu-ally benefits the franchisor far morethan the franchisee. The franchisee isgenerally subject to meeting salesquotas and is required to purchaseequipment, supplies and inventoryexclusively from the franchisor.

• Seek Professional Help The tax rulessurrounding franchises are oftencomplex, and an attorney, preferablya specialist in franchise law, shouldassist you to evaluate the franchisepackage and tax considerations. Anaccountant may be needed to deter-mine the full costs of purchasingand operating the business as well asto assess the potential profit to thefranchisee.

• Get More Information

Over 30 blog articles covering fran-chise tips and best practices areavailable from SBA at sba.gov.

If you are considering purchasing afranchise, FTC’s Bureau of ConsumerProtection has a wide range of resourcesand guides at www.business.FTC.gov tohelp you buy a franchise avoid fran-chise taboos.

Information for this article was provided bythe SBA.

A Franchise Business Primer from the SBA

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You need a strategy before investing in afranchise. Doing your homework about the

franchise first will help you gain a solidunderstanding of what to expect as well as

the risks that could be involved.


BUSINESS Owners, Entrepreneurs andSmall Business Service Providersare growing their sales with social

media. Key benefits of social mediainclude attracting and engaging withmore customers on Facebook, Twitter,LinkedIn, Google+, YouTube, oGoing,blogs and more.

“Social Media provides businesses anunprecedented direct communicationwith customers! Using social media, abusiness directly informs their clientsabout what’s going on, promotes newoffers and services, and provides customerservice; the clients freely express with thecompany their experiences, ask questionsand provide direct feedback in a publicsetting. This level of intimacy and engage-ment hasn’t been achieved before,” saidSanjay Dalal, founder & CEO, oGoing.

oGoing is the nation’s fastest growingsmall business social media marketing net-work. Thousands of Business Owners,Entrepreneurs and Small Business ServiceProviders are using oGoing to generatewarm leads, attract new customers, pro-mote products and services, share deals,and engage with clients directly. oGoingpresents 5 social media tips and best prac-tices for a business to attract more cus-tomers using social media marketing:

1. Know the customers

Take time to know your customersthrough social networks. Stand in theirshoes. Learn more about their business.

Ask the question: “What are their needs?”Find them, and Search their social mediaupdates. Learn more about the customer’scustomers. The more knowledgeable onebecomes about the customer’s business,the more products and services the busi-ness can ultimately offer to them.

2. Connect with customers

After determining who the customers are,a business must take the logical next step:Connect or Follow them! Once connected,most social media networks share a livenews feed of the following user’s updates.Thus, when a business is logged in, theysee latest news stories about their cus-

tomers. Reading what’s going on providesgreater understanding of the customers’current situation, needs and events.

3. Engage with customers

Reading the customers’ updates and gain-ing further knowledge about them areimportant first steps. Next step is to beginengaging with the customers. The bestway: Reply to their updates and Ask ques-tions. When a business responds to whattheir customers are saying, and begins aconversation, that’s when engagementbegins. Social media is all about “live”conversations. Besides replying publicly, abusiness can also ask direct questions to

solicit a response, reply privately or senda direct message for further intimacy.

4. Promote customers

Often times, owners and marketers forgetthat social media marketing is not somuch about promoting their own busi-ness; rather, it’s more about promotingtheir customers. This simple fact changeshow well engaged the customers are.When the company takes on the onus ofpromoting their customers, the returnsare tangible and immediate. What cus-tomer doesn’t like a public promotion inthe form of a mention, sharing of theirupdates, or recommendation?

5. Ask for referrals from customers

After establishing a solid relationshipwith customers and prospects on socialmedia, a business can begin to transformthis engagement into leads. Social mediacannot be an off and on affair. It has bean always on campaign. Hence, a busi-ness must frequently login to socialmedia networks and engage with theirclients on a daily basis. When the time’sright, ask the customers for new referralsand share with them new offers.

oGoing provides a powerful social mediamarketing network for small business thatincreases website traffic, improves SEOranking, generates warm leads and attractsnew customers.

Five Small Business Social Media Tips to Attract Customers


www.swlaw.com

Understandingwhat makes you unique.TM

For information about our franchise practice, please contact Susan Grueneberg at 213.929.2543/[email protected] or Elizabeth Weldon at 714.427.7461/[email protected].

TWO CALIFORNIA PLAZA | 350 SOUTH GRAND AVENUE | SUITE 2600 | LOS ANGELES, CA 90071

DENVER | LAS VEGAS | LOS ANGELES | LOS CABOS | ORANGE COUNTY | PHOENIX | RENO | SALT LAKE CITY | TUCSON

We are grateful to our clients and community

for 25 successful years in Southern California.

Because not all solutions are black and white.TM


Social Media provides businesses anunprecedented direct communication withcustomers! Using social media, a businessdirectly informs their clients about what’sgoing on, promotes new offers and servic-

es, and provides customer service; theclients freely express with the company

their experiences, ask questions and pro-vide direct feedback in a public setting.



AS the West Coast Franchise Expo(WCFE) occupies the AnaheimConvention Center Oct. 23-25,

three important points help to explain theunprecedented interest in franchising today:● Franchising has outperformed the

overall U.S. economy for the past sixyears, according to Franchise BusinessOutlook.

● Demand for franchise units willincrease by more than 12 percent thisyear, according to FRANdata.

● Franchising will lead the nation’s eco-nomic rebound by creating an estimat-ed 220,000 jobs this year, according tothe International Franchise Association.

Systems Propel Franchise Success

What makes this level of success possi-ble? According to Dr. John P. Hayes, whohas taught tens of thousands of peoplehow to buy a franchise in the last 25-plusyears, it’s simple to explain. “Franchisorsdevelop business ideas and create a seriesof operational systems that propel thebusiness to success. The systems includemarketing, sales, training, locationexpertise, product development, etc.Essentially, franchisors create a businessmodel for franchisees to replicate ensur-ing brand standards for the consumer.

“In exchange for a fee, franchiseeswork with franchisors to learn what isnecessary to replicate the business’s suc-cess. The less that’s left to chance the bet-ter,” continues Hayes, author of Buy ‘Hot’Franchises Without Getting Burned.

“Franchisees spend weeks, maybe amonth or more, training for their roles,which is to own and operate one or moreunits of the franchise brand.

Collaboration Spawns More Brands

Demand for franchising is reachingunprecedented levels, according to manyexperts, because franchisors and fran-chisees work together effectively to buildbrand awareness. However, Hayes pointsout that today’s franchising success is aresult of years of practice and develop-ment, and disclosure.

“Many of us remember when franchis-ing was a black hole and people wereafraid to get near the concept. But all ofthat changed in 1979 when the U.S.Government regulated franchising.”Since then, franchisors are required todisclose pertinent information abouttheir businesses before selling a franchise.

Questioning Existing Franchisees

Hayes explains, “It’s the disclosureprocess that separates franchising fromother forms of riskier business. And that’swhat helps protect the franchisee’sinvestment. Before they pay their money,franchisees can learn the good, the bad,and the ugly about franchisors. Allthey’ve got to do is read the disclosuredocument, which must be written in lay-man’s English and provided free by thefranchisor. That document includes a listof the franchisor’s current franchisees. Alla prospective franchisee has to do is call

the existing franchisees and ask some keyquestions: How good is this business?Would you buy it all over again?” Thedisclosure document also includes thefranchisor’s financial statements. “It’s akey document to exploring opportunitiesin franchising,” says Hayes.

The Place To Find Franchisors

No one knows for sure how manyfranchisors exist in the USA, but manyleading brands exhibit at the annualWCFE, which is sponsored by theInternational Franchise Association.According to WCFE Marketing Manager,Sonia Perrone, the expo makes it easierfor prospective franchisees to findexpanding franchise brands.

“Expo visitors are always amazed by thenew and famous concepts that they dis-

cover on the show floor, and they appreci-ate that the expo makes it easier to talk tofranchisors and franchisees, to gather infor-mation, and to explore the opportunitiesof business ownership. Many people aredelighted to find a franchise that meetstheir budget, whether it’s under $10,000 ormore than $1-million. Even part-time fran-chises are among the exhibitors.”

Finding Money to Buy a Franchise

In addition to several hundred fran-chise exhibitors, the WCFE alsoincludes vendors that support fran-chisees and franchisors. People lookingfor money to acquire a franchise canvisit the U.S. Small BusinessAdministration, as well as other lenders.Veterans of the U.S. Armed Forces willfind help from VetFran, a non-profitorganization that helps veterans buyfranchises with discounts.

Joy Matsui ended a 12-year Navy careerserving aboard aircraft carriers visitingports in Hong Kong, Australia, Singapore,and Guam, but today, with the help ofVetFran, she owns a Happy & HealthyProducts franchise in southern California.Matsui says, “No matter what your mili-tary background, it translates extremelywell for running a franchise business.”

The WCFE, the largest franchise expo in thewest, also helps educate prospective fran-chisees and franchisors by offering dozens ofworkshops and seminars, many of them free.Details can be found at WCFExpo.com.

Franchising Is Booming Again, And Here’s Why


Demand for franchising is reaching unprecedented

levels, according to many experts, because

franchisors and franchiseeswork together effectively to

build brand awareness. However, Hayes points out

that today’s franchising suc-cess is a result of years ofpractice and development,

and disclosure.



#1 in average store sales*

superior tastefresh ingredients

*Based on 2014 FDD self-disclosures of major competitors–Yogurtland, Menchies, Red Mango, Orange Leaf and TCBY

Opportunities for franchising with the most talked-about, innovative frozen yogurt retailer

are now available. If you have the desire to surprise and delight customers while owninga business you will love, please contact us.

[email protected]


UNITS: 269

TOTAL FRANCHISES: 253

COMPANY OWNED: 16

COUNTRIES:Bahrain, Canada, Dominican Republic, Egypt,India, Japan, Jordan, Kuwait, Lebanon, Morocco,Oman, Peru, Philippines, Puerto Rico, Qatar,Russia, Saudi Arabia, Turkey, United ArabEmirates, United States of America, Venezuela

PROJECTED COST: $311,292 - $615,795 (*)(*)Per U.S. Franchise Disclosure Document– including franchise fee, opening inventory,training and 3 months cash expenditures

FRANCHISE FEE: $35,000 per unit

ROYALTY FEE: 6% monthly fees

MARKETING FEE:2% national marketing, 2% local marketing spend

YEAR STARTED: 2005

TARGET STATES IN US: All

FINANCING AVAILABLE? No

NEW FRANCHISEE CONTACT:Leanne SmithManager, Business Development(310) [email protected]

TOP LOCAL EXECUTIVE:Ryan PatelVice President, Global Business & Real EstateDevelopment(310) 299-2500

Franchise Profile

Pinkberry3130 Wilshire Blvd 4th Floor, Santa Monica, CA 90403

(310) 299-2500 • www.pinkberry.com

Description ofFranchise Operation

Pinkberry is the original brandthat reinvented the frozenyogurt category with its tart,light and refreshing taste.With a continued dedication toquality and a passion for yogurt,Pinkberry is focused on beingthe most innovative yogurtretailer in the world offeringpremium quality and servicewith a cult-like following. Since2005, Pinkberry has createdexceptionally strong emotionalconnections with its customersand grown into a global brandwith over 260 stores in 21countries.



THE ULTIMATE FRANCHISE OPPORTUNITY!UFC GYM – part of the Ultimate Fighting Championship (UFC) is looking to meet with

qualified investors to own and operate UFC GYMs in Southern California.

For more information about owning your own UFC GYM franchise, call Philip Jacobs at (714) 668-0911 ext. 15


UNITS: 110 open; 75 under development

COMPANY OWNED: 16

INITIAL INVESTMENT: $275K - $550K

FRANCHISE FEE: $30,000

ROYALTY (%): 6%

YEAR STARTED: UFC Gym was founded in 2010;have been franchising since 2013

TARGETED STATES IN US: All

FINANCING AVAILABLE? 3rd partyfinancing is available

TOP LOCAL EXECUTIVE:Philip JacobsDirector of Franchise Development(657) 900-4481

Franchise Profile

UFC GYM1241 East Dyer Road #100, Santa Ana, CA 92705

(714) 668-0911 • www.ufcgym.com

Description ofFranchise Operation

The UFC is one of the fastestgrowing brands in the world.We are franchising small andmedium size fitness centers witha martial arts focus catering tosuburban families and people ofall ages and fitness levels. TRAINDIFFERENT!


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