LAU Lecture
The Franchise Cycle: The Process and the steps to becoming a Franchisor
Inclusive of the relationship between the Franchisor & the Franchisee.
Presented by Dr. Khaled A.Taki,
President of the Arab Franchise Association
Founder and Senior Consultant
Franchise Business Consultants - Beirut Lebanon
Friday the 10th of May 2013 at 11:00 am
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Good morning
First let me start by saying that it is a pleasure to be here today
and that we had had several of the LAU Business school
graduates do their internship at our FBC offices and we were
very pleased in deed.
So it is great to be able to come and address you all today.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Let me start by posing the question …Franchising………..what is it?
My own definition based on my experience is that Franchising
“ is the ability to duplicate exactly an existing successful business
which has a unique concept and a proven success track
record, but not only to duplicate it physically , but also to
1. Have a system which ensures that the duplicate branch is run
properly , (using manuals)
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
2. The people in it are trained as to how to run the branch
properly and have a manual to do so
3. Last but not least , the product or service which the business is
offering is assembled and delivered to the clients properly in a
professional way and is exactly the same as that being offered at
any of the branches .
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Example, when you go to have a McDonalds Big Mac in Paris,
London, New York or Beirut , the big Mac tastes the same and the
branches are all duplicates of one another.
This leads to you being able to identity with the business brand
and come again and again knowing that you will get the same and
you will become a loyal client.
Now that we have established what franchising is, who are the
main players in franchising?
Frankly there are many players involved in the process of
duplicating the successful business, but the
key players are two:
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
The first is the Franchisor, who is the person or company that own
the existing business, and therefore have build over the years the
“KNOW HOW” , reputation, and are ready to start duplicating it.
The second is the Franchise, who is the person or company that
wants to share the success of the Franchisor by applying to open
a duplicate of the successful business and avoid any risks of
failure.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
The Franchisor will grant a Franchisee licensee and sign a
franchise agreement with the Franchisee so that the franchisee
can go ahead and establish the exact duplicate branch in a certain
territory and be supported by the Franchisor to ensure success.
Now having presented the basics of Franchising let me start the
lecture of today which is entitled The Franchise cycle, the process,
and the steps to becoming a franchisor.
And of course the relationship between the Franchisor and the
Franchisee.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
INTRODUCTION
So once again , I am delighted to be
able to present to you our
understanding of the Franchise process,
the steps and documents that are
required for a company to become a
Franchisor, and also highlight the
relationship between the
Franchisor
and the Franchisee and their mutual
obligations.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
FRANCHISING History in brief
 Franchising began in the west in the past century, in the United
States and the United Kingdom, where a successful , call it magic
formula, for a product and/or service was founded and in turn it
could be easily duplicated in one or more locations.
 Examples Subway as a restaurant , and other industries and
services, such as clothing, retailing, etc
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
FRANCHISING History in brief
 In the past most Arabs followed the trend which calls for
acquiring an Exclusive Representation for a product and service,
(Wikala hasriyeh).
 However, this is now changing and although Franchising is a
relative new concept to the Arab world and the Middle East, it is
fast becoming the most popular system for the expansion of a
growing business, with minimum investment.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
So, what does the Franchising process involved?
 The Franchise Process: involves two parties,
 One being the Franchisor, who has a proven
successful business, a magic formula, based
on his own concept, and
 The other a Franchisee, who is eager and
willing to pay the Franchisor for the right to
duplicate the concept and wishes to run it as
his own self employed business.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
So, what does the Franchising process involved?
 In many ways, it is similar to a marriage
between two people, except that it
follows the catholic rules where there is
no divorce, at least not for the period of
the franchisee agreement which runs
for 10 years and can be renewed for ten
more or even indefinitely.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
When does the Franchise process begin?
The Franchise process begins, when a
company, makes the decision to become a
franchisor, which will take a considerable
amount of commitment, effort and
internal organization.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
So, How does a company become a Franchisor?
 First, the company should start by establishing a Franchise
International Division, to be run by a Head designated to
handle and follow up all potential inquiries. New letter head,
envelopes and business cards can add to the Franchise
Division credibility and provide clarity in all future
communications.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
So, How does a company become a Franchisor?
 Next the company must set up the Franchise process in
motion, by developing its own Franchise Development
Package, which
consists of letters, documents, legal
contracts and manuals, all of which will be essential tools in
the implementation of a successful franchise operation.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
The contents of the Franchise Development package
contains 7 documents and is divided
into three parts.
 Part I , contains a letter of response (FDP 1) to any inquiry,
the Franchisors criteria for granting a Franchise ( FDP 2) and
the Master Franchise Price listed (FDP 3 ) for each country
 Part II contains the legal documents involved such as the
Franchisor Uniform Franchise Offer Circular UFOC(FDP 4 ) ,
the MOU an the Franchise agreement (FDP 5)
 Part III contains the Operations (FDP 6), Training (FDP 7) and
Product Assembly preparation manuals (FDP 7a).
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part I – The internal-external examination of the
Franchisor
 FDP- 1 - Letter of Response to any inquiry by a potential
franchise.
The letter acknowledges the inquiry, introduces the
Franchisor’s complete history, expertise, and requests a
company profile of the potential Franchisee for evaluation
and proposed sites where the Franchise branch is to be open
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part I – The internal-external examination of the
Franchisor
 FDP-2 - Franchisor’s Concept and Criteria for granting a
Franchise
It includes the module sizes, location, personnel required and
a brief analysis of the investment required and return, and
availability of manuals and on site training.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part I – The internal-external examination of the
Franchisor
 FDP-3 The Franchise Master Fee Price List per country.
This is a difficult task; it takes into consideration the
Franchisors history as goodwill, reputation, performance,
financial success based on turnover, and a projected profit
and loss analysis for the Franchise to justify the projected
potential investment.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part II - The Legal Aspects of Franchising
 FDP- 4 -The Uniform Franchise Offering Circular (UFOC) which
is used in the west, states clearly the responsibilities of the
Franchisor and Franchise and covering s most of the basic
legal aspects which have been agreed upon at least 15 days
prior to the Franchise Agreement being signed.
Once the offer has been agreed then legal council for both
parties take over for review, consultation and
implementation.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part II - The Legal Aspects of Franchising
 FDP- 4 -The Memorandum of understanding MOU is used in
the Arab world and the middle east instead of the Uniform
Franchise Offering Circular (UFOC) and it serves the exact
same purpose . Because locations are hard to find in our
region , a Franchisee may choose to reserve the territory by
signing the MOU and once the location has been found and
approved then move on to the Franchisee agreement being
signed and implementation.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part II - The Legal Aspects of Franchising
 FDP- 5 The Franchise Agreement which states all
responsibilities of the Franchisor and Franchise, without
exception, it follows matters agreed in the UFOC and expands
further into all relevant areas and is approximately 95 pages,
any violation by the Franchisee can result in the cancellation
of the Franchise by the Franchisor.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part III –
The preparation of a set of three ‘tailor made’
manuals essential to all Franchisors
 FDP-6 - The Operations Manual which covers in detail all
aspects of the new Franchise and serves as a guide on how to
run the identical branch, 120 to 150 pages long and follows an
international content format.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part III –
The preparation of a set of three ‘tailor made’
manuals essential to all Franchisors
 FDP – 7 - The “Step-by-Step” Training Manual which covers in
detail how to train those who will run the Franchise branch,
using the “ T T T - Train the Trainer ” method, and requires
either 4 or 6 weeks.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
Part III : Continued
FDP- 7a (Applicable to all F&Bs) – The Menu Preparation
Manual is required which covers in detail the preparation of all
items inclusive of ingredients, weights and methods.
Now let us assume that the Franchisor and the Franchisee have
agreed, the lawyers have completed all formalities, the
Franchise agreement has been signed, the two parties are
married, and it is time to get the new home ready.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
The Implementation process now begins, a 120
day-period, a critical stage as it will determine
the success or failure of the Franchise.
1. The Franchisor’s International Division is to implement a
duplicate branch of the prototype franchise module, within a
Time Frame plan of 4 months
2. The Franchisor’s International Division appoints a Project
Manager, with experience, to supervising over the
implementation process from start to finish, including the
Grand Opening of the Franchise.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
The Implementation process now begins, a 120
day-period, a critical stage as it will determine
the success or failure of the Franchise.
3. The Franchisee in turn will nominate a Branch Manager to
be trained by the Franchisor for 6 weeks and to then assist
the Project manager during the implementation process until
the Grand Opening.
4. Preparing for the Grand Opening the International Division
along with the Franchisee plan for the Grand Opening
festivities, assisted by a Marketing Advertising firm to insure
success.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
The Implementation process now begins, a 120
day-period, a critical stage as it will determine
the success or failure of the Franchise.
3. The Grand Opening day completes the implementation
process and the Project manager turns over the new
Franchise to the Branch manager.
4. Now the company can claim to be a franchisor, having
granted and successfully implemented the first Franchise,
and is ready to continue along the path of Franchising.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
 Follow up, now the Franchisor will continue to provide
support, collect the royalties, as stipulated in the agreement
with periodic visit to the Franchise for the duration of the
franchise agreement, or shall we say for the duration of a
very successful marriage lasting ten to twenty years at least.
 FBC hopes that the information we have presented explained
clearly the Franchise cycle process.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
 We encourage all companies to look into this important
sector, for it has and will continue to provide Lebanon with
many wonderful opportunities.
 At FBC we can also provide you with other services and look
forward to being of services in the near future and always
ready to answer any of your questions
For further information please do contact us at any time.
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬
‫‪Arab Franchise Association‬‬
‫الجمعية العربية لترخيص االمتياز‬
‫‪Arab Franchise Association‬‬
‫الجمعية العربية لترخيص االمتياز‬
Thank you
Arab Franchise Association
‫الجمعية العربية لترخيص االمتياز‬