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01_045817 ffirs.qxp 8/28/06 4:02 PM Page iii Franchising FOR DUMmIES‰ 2ND EDITION by Michael Seid and Dave Thomas 01_045817 ffirs.qxp 8/28/06 4:02 PM Page ii 01_045817 ffirs.qxp 8/28/06 4:02 PM Page i Praise for Franchising For Dummies, 2nd Edition “It is increasingly important that prospective investors know how to prop- erly investigate franchising before taking the big step. Franchising for Dummies, 2nd Edition, is a crucial guide for anyone who is seriously con- sidering the path to small-business ownership. Michael and Dave’s long experience and expertise in franchising makes them exceptional guides.” — Matthew Shay President, International Franchise Association “Dave Thomas, the legendary founder of Wendy’s, and Michael Seid, one of the nation’s leading franchise consultants, have written the ultimate fran- chise primer. Whether you are planning to become a franchisee or looking to start your own franchise system, don’t go into franchising without it.” — Lawrence “Doc” Cohen, CFE Franchisee; Great American Cookies, Pretzel Time, and Coffee Beanery Chairman, International Franchise Association “I have had the privilege of knowing Michael Seid for many, many years and there is no human being on the planet with more knowledge about fran- chising than Michael. I have read his publications over and over again — and each time I learn something new that helps me grow my business. Anyone who makes his or her living in the “franchising world” is doing himself or her- self a gross injustice by not making the time or effort to read this book.” — Sidney Feltenstein, CFE Chairman, Sagittarius Brands Captain D’s Seafood and Del Taco Past Chairman, International Franchise Association “Franchising For Dummies, 2nd Edition, is the most important book prospective franchisees and those interested in becoming franchisors should read. We routinely turn to Michael Seid & Associaties (MSA) to per- form critical assignments for our clients — including such industry lead- ers as Pizza Hut, 7-Eleven, Arby’s, and The Miss Universe Organization — and in this book you get what you need to know straight from the nation’s leading consulting expert.” — David Kaufmann Senior Partner Kaufmann, Feiner, Yamin, Gildin & Robbins LLP New York 01_045817 ffirs.qxp 8/28/06 4:02 PM Page ii “At every Wing Zone Discovery Day, our prospective franchisees receive two disclosure documents. The first is the Uniform Franchise Offering Circular, as prescribed by law and the second is Franchising For Dummies, 2nd Edition. There is no easier way to translate legalese into layman’s English, than placing these two documents side by side.” — Stan Friedman, CFE Executive Vice President, Wing Zone “Michael brings insight and a wealth of practical experience to Franchising For Dummies, 2nd Edition. I have worked for many years with Michael, and his expertise has made him the leading consultant in franchising and invariably our clients’ first choice as an advisor.” — Arthur L. Pressman Co-Chair, Franchise and Distribution Practice Team Nixon Peabody LLP, Boston, MA “I have had the privilege of working with Michael Seid for many years in support of franchising at the International Franchise Association. Michael Seid and Dave Thomas have penned a must-read for anyone interested in creating a successful franchise system or becoming a franchisee. Franchisees and franchisors alike owe a debt of gratitude to Michael and Dave for this fine work.” — James H. “Jim” Amos Jr., CFE Chairman Emeritus, MBE/UPS Chairman of SONA MED Spa Past Chairman, International Franchise Association 01_045817 ffirs.qxp 8/28/06 4:02 PM Page iii Franchising FOR DUMmIES‰ 2ND EDITION by Michael Seid and Dave Thomas 01_045817 ffirs.qxp 8/28/06 4:02 PM Page iv Franchising For Dummies®, 2nd Edition Published by Wiley Publishing, Inc. 111 River St. Hoboken, NJ 07030-5774 www.wiley.com Copyright © 2006 by Wiley Publishing, Inc., Indianapolis, Indiana Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permit- ted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600. Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing, Inc., 10475 Crosspoint Blvd., Indianapolis, IN 46256, 317-572-3447, fax 317-572-4355, or online at http:// www.wiley.com/go/permissions. Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. Wiley Publishing, Inc., is not associated with any product or vendor mentioned in this book. LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REP- RESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CON- TENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CRE- ATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CON- TAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FUR- THER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFOR- MATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ. For general information on our other products and services, please contact our Customer Care Department within the U.S. at 800-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002. For technical support, please visit www.wiley.com/techsupport. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. Library of Congress Control Number: 2006927771 ISBN-13: 978-0-470-04581-7 ISBN-10: 0-470-04581-7 Manufactured in the United States of America 10 9 8 7 6 5 4 3 2 1 2O/RY/QZ/QW/IN 01_045817 ffirs.qxp 8/28/06 4:02 PM Page v About the Authors Michael H. Seid, Founder and Managing Director, Michael H. Seid & Associates Michael Seid (West Hartford, CT) is founder and Managing Director of Michael H. Seid & Associates (MSA), the nation’s leading consulting firm spe- cializing in franchising and other methods of distribution. At the age of six, Michael began to work in his family’s business, Ruth and Dave’s in Brooklyn, NY, and traces his success as a businessperson to the lessons taught to him by his parents. From working with his parents, his brother (Mark), and his sister (Carol), he learned the lifelong meaning of quality, consistency, entre- preneurship, ethics, fair play, and respect for the customer. During his 25+ years in franchising, Michael has been a Senior Operations and Financial Executive or Consultant for companies within the franchise, retail, hospitality, restaurant, and service industries. He has also been a franchisee. Michael is the past Chairman of the International Franchise Association (IFA) Supplier Forum, a former member of the IFA’s Executive Committee, and the first supplier ever directly elected to the IFA’s Board of Directors. Michael is a CFE (Certified Franchise Executive) and a very nonpracticing CPA. MSA’s clients are diverse, and Michael routinely works with large multina- tional Fortune 10 companies as well as small emerging businesses. MSA assists emerging franchisors in the design and development of their franchise systems and with established franchisors and other companies in the devel- opment of their tactical planning for domestic and international expansion and support. MSA also provides headquarters and field support systems, manuals and training programs, marketing and expansion strategies, fran- chise relations, crisis management, expert witnesses, litigation support, and the strategic restructuring of established franchise systems. Michael has been the backup servicer for several of the nation’s largest transactions related to royalty securitization for franchisors. Michael is a noted author of numerous articles on franchising, an oft-quoted expert in the field, and a frequent lecturer on the subject of franchising. Michael is married to his wife of 30 years, Susan, and has two children, Rachel and Andrew. For more information on the services offered by MSA, including speaking or consulting services, call 860-523-4257. Michael’s e-mail address is [email protected], and MSA’s Web site is www. msaworldwide.com. 01_045817 ffirs.qxp 8/28/06 4:02 PM Page vi Dave Thomas, Late Founder of Wendy’s International Dave Thomas began his lifelong career in the restaurant industry at the age of 12, working the counter at the Regas Restaurant in Knoxville, TN. There, he fell in love with the restaurant business and learned that he could be any- thing he wanted to be if he worked hard and had a burning desire to succeed.
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