For most franchisors, December 31 marks the end of their fiscal year and the beginning of the countdown to the day when their Franchise Disclosure Documents will “go stale”. Under the FTC’s Franchise Rule, every franchisor must update their FDD no later than 120 days after their fiscal year end. On top of that, their state franchise registration will need to be updated soon (in most cases). Here are some things that every franchisor should think about as they get ready for their annual FDD update:
A recent Business News Daily article discusses the experiences of young entrepreneurs facing a challenging economy. The article includes the story of Aaron Dilley, age 24, who began his career as a school teacher. When Aaron became discouraged with a public school system he felt lacked passion for education, he began searching for another position. However, an underwhelming job market and devastating national unemployment rate made his search difficult. Despite this, he considered starting a franchise and now owns Best in Class Education Center, which specializes in providing math and English tutoring.
This is one of the most common questions I hear from successful entrepreneurs who are considering franchising their businesses. Often, they’ll tell me that they’ve been told they need to have at least $100,000 in the bank. I don’t know where this number comes from or who has said it is true, but it is a persistent phenomenon. As with most things in life, the answer is “It depends.”
Patrick Maslyn was recently quoted in an excellent article in Entrepreneur magazine about why prospective franchisees would be wise to seek out an experienced franchise lawyer.
These days, franchise loans are hard to come by. Business Insider recently published an article asserting this problem exists – at least in part — because the Federal Reserve is quietly continuing a bailout program initiated during the financial crisis in which it pays big banks interest on their excess reserves.