This month I'm pleased to introduce our guest author Dr. Larry Lerner from Empire Business Solutions.

Empire Business Solutions is a full service business brokerage company that helps business owners successfully sell their businesses and buyers find the business of their dreams Dr. Lerner will be periodically sharing his knowledge with us.

Today he offers a great deal of insight into how to Franchise Your Business.

Some of the best known brands in the world, McDonald's, Burger King, Subway, Marriott, Blockbuster, 7-Eleven, and Mail Boxes, Etc., just to name a few, have grown their companies through franchising.

There are currently over 3000 franchisors in the US. According to the International Franchise Association (IFA) there are more than 320,000 franchises in the US in 75 different industries, employing over 8 million people and generating more than 1 trillion dollars annually. In fact, one out of every three dollars spent by Americans for goods and services is spent in a franchised business, and one out of 12 retail businesses in the US is a franchise.

If you want an avenue in which to grow your business more rapidly than expansion through corporate stores, then franchising may be right for you. In franchising, the capital needed to expand the business is provided by the franchisee. It is the classic case of using other people's money. Some of the advantages of franchising are:

1. Rapid Expansion - Franchising in most cases is the fastest way to expand a business.

2. Multiple Sources of Revenue - Franchisors receive income from a variety of sources including: Franchise fees, Franchise royalties, Equipment sales, Supplies, Services, Property rental, and Rebates from vendors of equipment, supplies and services.

3. Development of Advertising and Promotional Materials - Most franchisors require their franchisees to pay a monthly advertising royalty that is used to develop advertising tools and buy PR.

4. Market Dominance - Because franchises tend to grow rapidly, they tend to locate many units in a given market and essentially squeeze out the competition.

5. Increased Buying Power - The greater the number of units in a system, the more buying power and leverage a company has.

6. Attractive Acquisition Target - Franchisors that are successful in growing their systems to a lot of units are very attractive acquisition targets because of the significant cash flow.

7. Better Management and Efficiency - Finally, franchise units tend to be better managed and more efficient then corporate stores since franchisees have their own capital invested in the business.

In order to franchise your business, the Federal Trade Commission requires a business to develop a Uniform Franchise Offering Circular (UFOC). This is a document which contains a history of the company, background information on the owners and officers of the company, a breakdown of the required investment, audited financial statements, the franchise agreement, a listing of existing franchises, litigation history, and other information on the company.

The Federal Trade Commission requires that this document be given to a franchise prospect at the first personal meeting or at least ten days prior to the signing of the franchise agreement and the payment of the franchise fee.

In addition, 14 states require you to register the UFOC and may impose additional requirements on a franchisor. It is extremely important to use an experienced franchise attorney to develop the UFOC.

Remember, you are going to have to live with the requirements you put in the franchise agreement for many years.

Therefore, it is more important to hire an expert to do it right from the beginning than to save a few dollars that could cost you many more dollars down the road.

In addition to the UFOC, a new franchisor needs to consider how he or she is going to recruit franchisees, develop a training program, develop manuals (operations, marketing, start-up etc.), provide support, develop marketing and advertising materials, and build a profile of what he or she would like to see in a prospective franchise.

However, don't worry, there are many experts in franchising that can assist you with all of the above and much more.

Written by Dr. Larry Lerner, President of Empire Business Solutions. Dr. Lerner has an MBA in finance and is a Certified Business Broker (CBB). In addition, Dr. Lerner has been a franchisor and has served in several high level executive positions for a national franchise company.

Key Commercial Loan Indexes

Fed Prime Rate 8.250%

10-Year CMT 4.770%

30-Year CMT 4.910%

USD 6 MOS LIBOR 5.314%

As of August 6, 2007

Great, I'm really excited about using SBA Financing, but I don't believe my franchise is approved, now what? This is a question our office gets time and time again.

My first question is; "How do you know your prospective franchise is not approved." At this point most people are assuming because it's either too new or too small the SBA had not approved the franchise for financing.

Or on the converse I'm told there is no doubt about it my franchise is definitely approved.

Again I ask, "How do you know?"

The answer is that it's a large franchise that has been around for "hundreds" of years.
Again I answer that's NOT A GUARANTEE!

There's only one definitive answer it must be verified by researching the Franchise Registry and actually seeing it listed. Below is the link

http://www.franchiseregistry.com/Registry/

After you go to the link search by name for your franchise. If at first you don't see the name, it might not be that it is not approved but you might not have the right name. You may be looking for the "common" name of the franchise but not the actual name of the Franchisor.

So before you panic be 100% sure you know the name of the Franchisor.

By examining the UFOC, Uniform Franchise Offering Circular, the Franchisor name is clearly stated on the face of the documents.

So if you franchise appears on the registry all you need to do is start working on your financial package with the lender of your chose. We recommend that you only work with a "PLP" SBA Lender. A "PLP" stands for Preferred Lender Provider.

A "PLP" Lender does not have to go to the SBA for loan approval, they only go to SBA after for the SBA number that is needed by the lender.

If after the above searching the franchise registry it still does not appear, you may have one more option. That is get the Franchise approved. This is not an easy step but one that can be accomplished.

The reason that a franchise may not be approved is because there is certain limiting language within the UFOC. By presenting a copy of the UFOC to the local SBA legal department a franchise could be approved within about three months. The legal Department for the SBA will review all offering documents and financials of the franchisor and then make a determination if they want to put the SBA Guarantee behind the financing of any franchises.

To facilitate the above get in touch with your local "PLP" SBA lender and request that they attempt to get the SBA to approve the franchise. Or feel free to contact us and will put our our resources at work to help you.

Due to length of previous articles there is no Ask the Broker? this month.

Please email your questions to "Ask Your Financial Broker" at Askthebroker@loanforbiz.com.

P.S. If you are interested in joining our company please contact either Harlan or David directly. We will be expanding this year and would like to have you join us. For those financially astute individuals we offer a proven system to build your commercial finance business along with comprehensive training.

email: harlan@loanforbiz.com

phone: 858-592-0659

web: http://www.loanforbiz.com