Getting Help With Franchise Process

Question: I started my business in 1992 and currently have six locations in Los Angeles and New York. I’d like to franchise nationally, but I don’t know how to get started. Any suggestions?

Answer: You’ve accomplished the first important step by opening and replicating your concept at several successful locations. It is even better that you have done so in both California and New York. “Franchisees are looking for businesses that have been tested and have a proven track record,” said Ken Costello, a Los Angeles attorney who co-chairs the franchise and distribution law practice group of law firm Jenkens & Gilchrist.

Before a company can franchise, federal law requires it to prepare a detailed disclosure document and give it to prospective franchisees about two weeks before they sign any binding agreement or pay any money. More than a dozen states, including California and New York, also require companies to register with state regulators before they offer or sell franchises.

Be wary if anyone tells you that these laws can be avoided if you license your business concept rather than franchise it, Costello said.

Locate an attorney who specializes in franchise law, which is highly technical. “Look for someone who has set up a significant number of franchise programs and who has regularly represented franchisors for seven or more years,” Costello advised. “You may also want to consider engaging a franchise consultant to help you.”

For information and referrals to expert attorneys, consultants and suppliers, visit the website of the International Franchise Assn., a trade organization, at www.franchise.org. The group sponsors periodic educational programs, Costello said, and publishes a monthly trade journal, Franchising World. A couple of other magazines that include resources for would-be franchisors are Franchise Times (www.franchisetimes.com) and Franchise Update (www.franchise-update.com).

Human Resource Duties Can Be Outsourced

Q: I own a small construction company and recently hired a receptionist and a superintendent. Now, I’m swamped with government literature, forms and filings that I don’t have time to deal with. I am ready to fire these employees that I hired to “make my life easier.” How is a small company supposed to handle the bureaucratic paperwork and still run the business?

A: Your frustration is common. In California, the employer-employee relationship is only slightly less complex than the Tax Code -- and it is getting more complex every day. Because of this, many micro-companies outsource their human resources work to professional employer organizations that specialize in managing payroll, benefit administration and workers’ compensation.

“PEOs allow you to keep the good part of having employees while outsourcing the bureaucratic paperwork,” said Sandra Dickerson, chief executive of Your People Professionals (ypp.com) and a human resources professional since 1987.

Typically, those organizations charge 50 cents to $1 per employee per hour, she said.

Be meticulous about examining in detail the history, references and certifications of any professional employer organization you consider hiring. Look for PEOs with industry certifications and examine their professional staff with the same care you would give to hiring a key manager. “They will be working with one of your greatest assets -- your people -- so you want to know as much about them as possible,” Dickerson said.

Those firms become “co-employers” of your workers, and many of the employer responsibilities are transferred from your business to theirs, she said.

Be careful around organizations that claim they can save you a lot of money. Most of the major expenses associated with hiring them are mandated by employment laws.

Got a question about running or starting a small enterprise? E-mail it to karen.e.klein@ latimes.com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.