rights at Business Franchise

When starting a new company or buying a franchise business everybody needs to make an important decision about the size of the prospective firm. Certainly it depends on the sphere of business, on franchise agreement, on the money you are going to invest and so on. But it is a good idea to think about the benefits that you can get if government officials will consider your company a representative of small business. As you may know there is a set of privileges or special conditions for small business firms. Government helps them to obtain loans on better conditions, protects their economic and juridical rights, and so on. But how to know whether the new company is eligible for all that privileges? I’m going to answer this question here.
 
The first thing that determines the company’s status is its legal position. The firm can considered a representative of small business when it is independently owned and operated and not dominant in its field of operation.
 
The second thing concerns size of the company. The SBA (Small Business Administration) has developed size standards that define the maximum size of an eligible small business. They vary by industry, and in some cases they depend on the number of employees but for other industries the size standards are determined in millions of dollars. I summarized these standards below:
 
Agriculture, Forestry, Fishing and Hunting (including Crop Production, Animal Production) – max $0.75 millions of dollars
Agriculture, Forestry, Fishing and Hunting (including Timber Tract Operations, Forest Nurseries and Gathering of Forest Products, Support Activities for Agriculture and Forestry) - max  $6.5 millions of dollars
Agriculture, Forestry, Fishing and Hunting (only Logging) – max 500 employees
Agriculture, Forestry, Fishing and Hunting (including Fishing, Hunting and Trapping) - max  $4.0 millions of dollars
Agriculture, Forestry, Fishing and Hunting (including Forest Fire Suppression and Fuels Management Services) - max  $16.5 millions of dollars
 
Mining (including Oil and Gas Extraction, Mining (except Oil and Gas), Drilling Oil and Gas Wells) – max 500 employees
Mining (including Support Activities for Oil and Gas Operations, Support Activities for Coal Mining, for Metal Mining, for Nonmetallic Minerals (except Fuels) - max  $6.5 millions of dollars
 
Utilities (Hydroelectric and Fossil Fuel Power Generation, Nuclear Electric and Other Power Generation, Electric Bulk Power Transmission and Control, Electric Power Distribution) - a company is considered small if it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.
Natural Gas Distribution– max 500 employees
Water Supply and Irrigation Systems and Sewage Treatment Facilities - max  $6.5 millions of dollars
Steam and Air-Conditioning Supply - max  $11.5 millions of dollars
 
Construction (including Construction of Buildings and Heavy and Civil Engineering Construction except Land Subdivision and Dredging and Surface Cleanup Activities) - max  $31.0 millions of dollars
Land Subdivision - max  $6.5 millions of dollars
Dredging and Surface Cleanup Activities - a company must perform at least 40% of the volume dredged with its own equipment or equipment owned by another small dredging concern.
Specialty Trade Contractors - max $13.0 millions of dollars
 
Food Manufacturing (except some industries mentioned below) - max 500 employees
Food Manufacturing (including Wet Corn Milling, Cane Sugar Refining, Beet Sugar Manufacturing, Cookie and Cracker Manufacturing) - max 750 employees
Food Manufacturing (including Specialty Canning, Breakfast Cereal Manufacturing, Fats and Oils Refining and Blending) - max 1000 employees
Soft Drink and Bottled Water Manufacturing, Ice Manufacturing, Breweries, Wineries, Tobacco Stemming and Redrying, Other Tobacco Product Manufacturing - max 500 employees
Distilleries - max 750 employees
Cigarette Manufacturing - max 1000 employees
 
Textile Manufacturing (except mentioned below)  - max 500 employees
Broadwoven Fabric Mills, Fabric Coating Mills, Tire Cord and Tire Fabric Mills - max 1000 employees
 
Apparel Manufacturing  - max 500 employees
Leather and Allied Product Manufacturing (except Rubber and Plastics Footwear Manufacturing)- max 500 employees
Rubber and Plastics Footwear Manufacturing - max 1000 employees
Wood Product Manufacturing- max 500 employees
 
Paper Manufacturing (including Pulp Mills, Paper and Paperboard Mills, Folding Paperboard Box Manufacturing, Non-Folding Sanitary Food Container Manufacturing) - max 750 employees
Paper Manufacturing (including Corrugated and Solid Fiber Box Manufacturing, Setup Paperboard Box Manufacturing, Fiber Can, Tube, Drum, and Similar Products Manufacturing, Coated and Laminated Packaging Paper and Plastics Film Manufacturing, Coated and Laminated Paper Manufacturing, Plastics, Foil, and Coated Paper Bag Manufacturing, Uncoated Paper and Multi-wall Bag Manufacturing, Laminated Aluminum Foil Manufacturing for Flexible Packaging Uses, Surface-Coated Paperboard Manufacturing, Die-Cut Paper and Paperboard Office Supplies Manufacturing, Envelope Manufacturing, Stationery, Tablet, and Related Product Manufacturing, Sanitary Paper Product Manufacturing, All Other Converted Paper Product Manufacturing) - max 500 employees
 
Printing and Related Support Activities - max 500 employees
 
Petroleum Refineries - the petroleum refinery company must be a concern that has no more than 1500 employees nor more than 125,000 barrels per calendar day total Operable Atmospheric Crude Oil Distillation capacity.
Asphalt Paving Mixture and Block Manufacturing, Petroleum Lubricating Oil, Grease and All Other Petroleum and Coal Products Manufacturing - max 500 employees
Asphalt Shingle and Coating Materials Manufacturing - max 750 employees
 
Chemical Manufacturing (including Petrochemical, Industrial Gas, Inorganic Dye and Pigment and Alkalis and Chlorine Manufacturing, Ethyl Alcohol and All Other Basic Organic Chemical Manufacturing, Synthetic Rubber, Cellulosic Organic Fiber, Noncellulosic Organic Fiber and Nitrogenous Fertilizer Manufacturing) - max 1000 employees
Chemical Manufacturing (including Synthetic Organic Dye and Pigment Manufacturing, Cyclic Crude and Intermediate Manufacturing, Plastics Material and Resin Manufacturing, Medicinal, Botanical and Pharmaceutical Preparation Manufacturing, Soap another Detergent Manufacturing, Explosives Manufacturing) - max 750 employees
Chemical Manufacturing (including Carbon Black, Gum and Wood Chemical Manufacturing, Fertilizer Manufacturing, Pesticide and Other Agricultural Chemical Manufacturing, In-Vitro Diagnostic Substance Manufacturing, Biological Product (except Diagnostic) Manufacturing, Paint, Coating and Adhesive Manufacturing, Polish and Other Sanitation Good Manufacturing, Surface Active Agent and Toilet Preparation Manufacturing, Printing Ink, Photographic Film, Paper, Plate and Chemical and All Other Miscellaneous Chemical Product and Preparation Manufacturing, Photographic Film, Paper, Plate and Chemical Manufacturing) - max 500 employees
 
Plastics and Rubber Products Manufacturing (except Tire Manufacturing) - max 500 employees
Tire Manufacturing- max 1000 employees
 
Nonmetallic Mineral Product Manufacturing (including Flat Glass and Gypsum Product Manufacturing) - max 1000 employees
Nonmetallic Mineral Product Manufacturing (including Vitreous China Plumbing Fixture and China and Earthenware Bathroom Accessories Manufacturing,  Nonclay Refractory Manufacturing, Other Pressed and Blown Glass and Glassware Manufacturing, Glass Container and Cement Manufacturing, Mineral Wool Manufacturing) - max 7500 employees
Nonmetallic Mineral Product Manufacturing (including Vitreous China, Fine Earthenware and Other Pottery Product Manufacturing, Porcelain Electrical Supply and Brick and Structural Clay Tile Manufacturing, Ceramic Wall and Floor Tile and Other Structural Clay Product Manufacturing, Clay Refractory Manufacturing, Glass Product Manufacturing Made of Purchased Glass, Ready-Mix Concrete, Concrete Block and Brick, Concrete Pipe and Other Concrete Product Manufacturing, Lime Manufacturing, Abrasive Product Manufacturing, Cut Stone and Stone Product Manufacturing, Ground or Treated Mineral and Earth Manufacturing, All Other Miscellaneous Nonmetallic Mineral Product Manufacturing) - max 500 employees
 
Primary Metal Manufacturing (including Iron and Steel Mills, Iron and Steel Pipe and Tube Manufacturing from Purchased Steel, Cold-Rolled Steel Shape Manufacturing, Steel Wire Drawing, Aluminum Refining, Primary Aluminum Production, Primary Smelting and Refining of Copper, Copper Wire (except Mechanical) Drawing) - max 1000 employees
Primary Metal Manufacturing (including Electrometallurgical Ferroalloy Product Manufacturing, Secondary Smelting and Alloying of Aluminum, Aluminum Sheet, Plate and Foil Manufacturing, Aluminum Extruded Product Manufacturing, Other Aluminum Rolling and Drawing, Primary Smelting and Refining of Nonferrous Metal, Copper Rolling, Drawing and Extruding, Secondary Smelting, Refining, and Alloying of Copper, Nonferrous Metal (except Copper and Aluminum) Rolling, Drawing and Extruding Secondary Smelting, Refining, and Alloying of Nonferrous Metal (except Copper and Aluminum) - max 750 employees
Primary Metal Manufacturing (including Iron Foundries, Steel Foundries, Aluminum Die-Casting Foundries, Nonferrous (except Aluminum) Die-Casting Foundries, Aluminum, Copper and Other Nonferrous Foundries (except Die-Casting) - max 500 employees
 
Fabricated Metal Product Manufacturing - max 500 employees (except the industries mentioned below)
Enameled Iron and Metal Sanitary Ware Manufacturing,  Ball and roller Bearing Manufacturing, Metal Heat Treating - max 750 employees
Metal Can Manufacturing, Small Arms Ammunition and Small Arms Manufacturing - max 1000 employees
Ammunition (except Small Arms) Manufacturing - max 1500 employees
 
Machinery Manufacturing - max 500 employees (except the industries mentioned below)
Construction Machinery Manufacturing, Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing, Industrial Truck, Tractor, Trailer and Stacker Machinery Manufacturing - max 750 employees
 Turbine and Turbine Generator Set Unit Manufacturing, Office Machinery Manufacturing - max 1000 employees
 
Computer and Electronic Product Manufacturing (including Manufacturing of Electronic Computers, Computer Storage Devices, Computer Terminals, Other Computer Peripheral Equipment, Telephones, Magnetic and Optical Recording Media) - max 1000 employees
Computer and Electronic Product Manufacturing (including Radicand Television Broadcasting and Wireless Communications Equipment and Other Communications Equipment Manufacturing, Audio and Video Equipment Manufacturing, Electron Tube Manufacturing, Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing, Prerecorded Compact Disc (except Software), Tape, and Record Reproducing) - max 750 employees
Computer and Electronic Product Manufacturing (including Software Reproducing, Bare Printed Circuit Board and  Semiconductor and Related Device Manufacturing, Electronic Capacitor and Electronic Resistor Manufacturing, Electronic Coil, Transformer, and Other Inductor Manufacturing,  Electronic Connector Manufacturing, Other Electronic Component Manufacturing, Electromedical and Electrotherapeutic Apparatus Manufacturing, Automatic Environmental Control Manufacturing for Residential, Commercial and Appliance Use, Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables, Totalizing Fluid Meter and Counting Device Manufacturing, Instrument Manufacturing for Measuring and Testing Electricity and Electrical Signals, Analytical Laboratory Instrument Manufacturing, Irradiation Apparatus Manufacturing, Watch, Clock, and Part Manufacturing, Other Measuring and Controlling Device Manufacturing) - max 500 employees
 
Electrical Equipment, Appliance and Component Manufacturing (including Electric Lamp Bulb and Part Manufacturing,  Household Refrigerator and Home Freezer Manufacturing, Household Laundry Equipment Manufacturing, Motor and Generator Manufacturing,  Primary Battery, Fiber Optic Cable and Other Communication and Energy Wire Manufacturing) - max 1000 employees
Electrical Equipment, Appliance and Component Manufacturing (including Electric Housewares and Household Fan Manufacturing, Household Vacuum Cleaner and Cooking Appliance Manufacturing, Power, Distribution and Specialty Transformer Manufacturing, Switchgear and Switchboard Apparatus Manufacturing, Relay and Industrial Control Manufacturing, Carbon and Graphite Product Manufacturing) - max 750 employees
Electrical Equipment, Appliance and Component Manufacturing (including Residential Electric Lighting Fixture, Commercial, Industrial and Institutional Electric Lighting Fixture Manufacturing, Other Lighting Equipment Manufacturing, Storage Battery Manufacturing, Current-Carrying Wiring Device Manufacturing,  Noncurrent-Carrying Wiring Device and All Other Miscellaneous Electrical Equipment and Component Manufacturing) - max 500 employees
 
Transportation Equipment Manufacturing (including Aircraft Manufacturing) - max 1500 employees
Transportation Equipment Manufacturing (including Automobile, Light Truck and Utility Vehicle Manufacturing, Heavy Duty Truck and Motor Vehicle Body Manufacturing, Motor Home Manufacturing, Aircraft Engine and Engine Parts Manufacturing, Other Aircraft Part and Auxiliary Equipment Manufacturing, Guided Missile and Space Vehicle Manufacturing, Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing,  Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing, Railroad Rolling Stock Manufacturing,  Ship Building and Repairing, Military Armored Vehicle, Tank and Tank Component Manufacturing) - max 1000 employees
Transportation Equipment Manufacturing (including Gasoline Engine and Engine Parts Manufacturing, Other Motor Vehicle Electrical and Electronic Equipment Manufacturing, Motor Vehicle Steering and Suspension Components (except Spring) Manufacturing, Motor Vehicle Brake System Manufacturing, Motor Vehicle Transmission and Power Train Parts Manufacturing, Motor Vehicle Air-Conditioning and All Other Motor Vehicle Parts Manufacturing) - max 750 employees
Transportation Equipment Manufacturing (including Truck Trailer, Travel Trailer and Camper Manufacturing, Carburetor, Piston, Piston Ring and Valve Manufacturing, Vehicular Lighting Equipment Manufacturing, Motor Vehicle Seating and Interior Trim Manufacturing, Motor Vehicle Metal Stamping,  Boat Building, Motorcycle, Bicycle and Parts and All Other Transportation Equipment Manufacturing) - max 500 employees
 
Furniture and Related Product Manufacturing and Miscellaneous Manufacturing - max 500 employees
 
Wholesale Trade - max 100 employees
Retail Trade – max $26.5 – $6.5 millions of dollars (see below)
New Car Dealers - max $26.5 millions of dollars
Supermarkets and Other Grocery (including Convenience) Stores, Gasoline Stations with Convenience Stores, General Merchandise Stores - max $25.0 millions of dollars
Nonstore Retailers (including Electronic Shopping, Electronic Auctions, Mail-Order Houses) - max $23.0 millions of dollars
Used Car Dealers - max $21.0 millions of dollars
Manufactured (Mobile) Home Dealers - max $12.0 millions of dollars
Heating Oil Dealers - max $11.5 millions of dollars
Aircraft Retail Dealers - max $9.0 millions of dollars
Gasoline Stations, Men’s, Women’s and Family Clothing Stores, Shoe Stores - max $8.0 millions of dollars
Electronics and Appliance Stores - max $8.0 but $6.5 millions of dollars for Camera and Photographic Supplies Stores
Recreational Vehicle Dealers, Motorcycle and Boat Dealers, All Other Motor Vehicle Dealers, Furniture and Home Furnishings Stores, Building Material and Garden Equipment and Supplies Dealers – max $6.5 millions of dollars
Meat Markets, Fish and Seafood Markets, Fruit and Vegetable Markets, Baked Goods Stores, Confectionery and Nut Stores, All Other Specialty Food Stores, Beer, Wine and Liquor Stores and Health and Personal Care Stores - max $6.5 millions of dollars
Children’s and Infants’ Clothing Stores, Clothing Accessories and Other Clothing Stores, Jewelry Stores, Luggage and Leather Goods Stores, Sporting Good, Hobby, Book and Music Stores - max $6.5 millions of dollars
Florists, Office Supplies and Stationery Stores, Gift, Novelty and Souvenir Stores, Used Merchandise Stores, Pet and Pet Supplies Stores, Art Dealers, Tobacco Stores, All Other Miscellaneous Store Retailers (except Tobacco Stores), Liquefied Petroleum Gas (Bottled Gas) Dealers, Other Fuel Dealers, Other Direct Selling Establishments - max $6.5 millions of dollars
 
Air Transportation (including Scheduled Passenger Air Transportation, Scheduled Freight Air Transportation, Nonscheduled Chartered Passenger Air Transportation, Nonscheduled Chartered Freight Air Transportation) - max 1500 employees
Offshore Marine Air Transportation Services - max $25.5 millions of dollars
 Line-Haul Railroads - max 1500 employees
Short Line Railroads - max 500 employees
Water Transportation - max 500 employees
Truck Transportation - max $23.5 millions of dollars
Transit and Ground Passenger Transportation - max $6.5 millions of dollars
Pipeline Transportation of Crude Oil, Pipeline Transportation of Refined Petroleum Products  - max 1500 employees
Pipeline Transportation of Natural Gas - max $6.5 millions of dollars
All Other Pipeline Transportation - max $31.5 millions of dollars
Scenic and Sightseeing Transportation - max $6.5 millions of dollars
Support Activities for Transportation (including Port and Harbor Operations, Marine Cargo Handling, Non-Vessel Owning Common Carriers and Household Goods Forwarders, Packing and Crating) - max $23.5 millions of dollars
Support Activities for Transportation (including Air Traffic Control, Other Airport Operations, Other Support Activities for Air Transportation, Support Activities for Rail Transportation, Navigational Services to Shipping, Other Support Activities for Water Transportation, Motor Vehicle Towing, Other Support Activities for Road Transportation, Freight Transportation Arrangement, All Other Support Activities for Transportation) - max $6.5 millions of dollars
 
Local Messengers and Local Delivery, Warehousing and Storage - max $23.5 millions of dollars
Postal Service - max $6.5 millions of dollars
Couriers - max 1500 employees
 
Publishing Industries (except Internet) - max 1500 employees but for Software Publishers the standard is max $23.5 millions of dollars
 
Motion Picture and Video Production, Motion Picture and Video Distribution, Teleproduction and Other Postproduction Services - max $27.0 millions of dollars
Cable and Other Subscription Programming - max $13.5 millions of dollars
Television Broadcasting - max $13.0 millions of dollars
Motion Picture Theaters (except Drive-Ins), Drive-In Motion Picture Theaters, Other Motion Picture and Video Industries, Record Production, Sound Recording Studios, Other Sound Recording Industries, Radio Networks, Radio Stations - max $6.5 millions of dollars
Integrated Record Production/Distribution - max 750 employees
Music Publishers, Internet Publishing and Broadcasting - max 500 employees
 
Telecommunications (including Wired Telecommunications Carriers, Paging, Cellular and Other Wireless Telecommunications, Telecommunications Resellers) - max 1500 employees
Telecommunications (including Satellite Telecommunications, Cable and Other Program Distribution, Other Telecommunications) - max $13.5 millions of dollars
 
 Internet Service Providers, Data Processing, Hosting, and Related Services - max $23.0 millions of dollars
Web Search Portals and Other Information Services - max $6.5 millions of dollars
 
Credit Intermediation and Related Activities (including Commercial Banking, Savings Institutions, Credit Unions, Other Depository Credit Intermediation, Credit Card Issuing, International Trade Financing) – max $165 million in assets. A financial institution’s assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.
Credit Intermediation and Related Activities (including Sales Financing, Consumer Lending, Real Estate Credit, Secondary Market Financing, All Other Non-Depository Credit Intermediation, Mortgage and Nonmortgage Loan Brokers, Financial Transactions Processing, Reserve, and Clearing House and Other Activities Related to Credit Intermediation) - max $6.5 millions of dollars
Financial Investments and Related Activities, Insurance Carriers and Related Activities, Funds, Trusts and Other Financial Vehicles - max $6.5 millions of dollars
 
Real Estate (including Lessors of Miniwarehouses and Self Storage Units) - max $23.5 millions of dollars
Real Estate (including Leasing of Building Space to Federal Government by Owners) - max $19.0 millions of dollars
Real Estate (including Lessors of Residential Buildings and Dwellings, Lessors of Nonresidential Buildings (except Miniwarehouses), Lessors of Other Real Estate Property)  - max $6.5 millions of dollars
Real Estate (including Offices of Real Estate Agents and Brokers, Residential Property Managers, Nonresidential Property Managers, Offices of Real Estate Appraisers, Other Activities Related to Real Estate) - max $2.0 millions of dollars
 
Rental and Leasing Services (including Passenger Car Rental, Passenger Car Leasing, Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing, Office Machinery and Equipment Rental and Leasing) - max $23.5 millions of dollars
Rental and Leasing Services (including Consumer Electronics and Appliances Rental, Formal Wear and Costume Rental, Video Tape and Disc Rental, Home Health Equipment Rental, Recreational Goods Rental, All Other Consumer Goods Rental, General Rental Centers, Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing, Construction, Mining and Forestry Machinery and Equipment Rental and Leasing, Other Commercial and Industrial Machinery and Equipment Rental and Leasing) - max $6.5 millions of dollars
 
Professional, Scientific and Technical Services (including Custom Computer Programming Services, Computer Systems Design Services, Computer Facilities Management Services, Other Computer Related Services) - - max $23.0 millions of dollars
Testing Laboratories - max $11.0 millions of dollars
Professional, Scientific and Technical Services (including Offices of Certified Public Accountants, Payroll Services, Other Accounting Services) - max $7.5 millions of dollars
 
Professional, Scientific and Technical Services (including Offices of Lawyers, Title Abstract and Settlement Offices, All Other Legal Services, Tax Preparation Services, Landscape Architectural Services, Drafting Services, Building Inspection Services, Interior Design Services, Industrial Design Services, Graphic Design Services, Other Specialized Design Services, Administrative Management and General Management Consulting Services, Human Resources and Executive Search Consulting Services, Marketing Consulting Services, Process, Physical Distribution and Logistics Consulting Services, Other Management Consulting Services, Environmental Consulting Services, Other Scientific and Technical Consulting Services, Research and Development in the Social Sciences and Humanities, Advertising Agencies, Public Relations Agencies, Media Buying Agencies, Media Representatives, Display Advertising, Direct Mail Advertising, Advertising Material Distribution Services, Other Services Related to Advertising, Marketing Research and Public Opinion Polling, Photography Studios, Portrait, Commercial Photography, Translation and Interpretation Services,  Veterinary Services, All Other Professional, Scientific and Technical Services) - max $6.5 millions of dollars
 
Professional, Scientific and Technical Services (including Architectural Services, Engineering Services, Map Drafting, Geophysical Surveying and Mapping Services, Surveying and Mapping Services) - max $4.5 millions of dollars
Research and Development in the Physical, Engineering, and Life Sciences - max 500 employees
Information Technology Value Added Resellers - max 150 employees
 
Management of Companies and Enterprises - max $6.5 millions of dollars
 
Administrative and Support Services (including Facilities Support Services) - max $32.5 millions of dollars
Administrative and Support Services (including Janitorial Services) - max $15.0 millions of dollars
Administrative and Support Services (including Temporary Help Services, Employee Leasing Services) - max $12.5 millions of dollars
Administrative and Support Services (including Investigation Services, Security Guards and Patrol Services, Armored Car Services, Security Systems Services (except Locksmiths) - max $11.5 millions of dollars
Administrative and Support Services (including Office Administrative Services, Employment Placement Agencies, Document Preparation Services, Telephone Answering Services, Telemarketing Bureaus, Private Mail Centers, Other Business Service Centers (including Copy Shops), Collection Agencies, Credit Bureaus, Repossession Services, Court Reporting and Stenotype Services, All Other Business Support Services, Tour Operators, Convention and Visitors Bureaus, All Other Travel Arrangement and Reservation Services,  Locksmiths, Exterminating and Pest Control Services, Landscaping Services,  Other Services to Buildings and Dwellings, Packaging and Labeling Services, Convention and Trade Show Organizers, All Other Support Services) - max $6.5 millions of dollars
Administrative and Support Services (including Carpet and Upholstery Cleaning Services) - max $4.5 millions of dollars
Administrative and Support Services (including Travel Agencies) - max $4.5 millions of dollars
 
Remediation Services - max $13.0 millions of dollars
Solid Waste Collection, Hazardous Waste Collection, Other Waste Collection, Hazardous Waste Treatment and Disposal, Solid Waste Landfill, Solid Waste Combustors and Incinerators, Other Nonhazardous Waste Treatment and Disposal, Materials Recovery Facilities - max $11.5 millions of dollars
Septic Tank and Related Services, All Other Miscellaneous Waste Management Services - max $6.5 millions of dollars
 
Educational Services - max $6.5 millions of dollars
Ambulatory Health Care Services (including Kidney Dialysis Centers, Hospitals) - max $31.5 millions of dollars
Ambulatory Health Care Services (including Medical Laboratories, Diagnostic Imaging Centers, Home Health Care Services) - max $12.5 millions of dollars
Ambulatory Health Care Services (including Offices of Physicians, Mental Health Specialists, Family Planning Centers, Outpatient Mental Health and Substance Abuse Centers, HMO Medical Centers, Freestanding Ambulatory Surgical and Emergency Centers, All Other Outpatient Care Centers, Blood and Organ Banks, All Other Miscellaneous Ambulatory Health Care Services) - max $9.0 millions of dollars
Ambulatory Health Care Services (including Offices of Dentists, Offices of Chiropractors, Offices of Optometrists, Offices of Mental Health Practitioners (except Physicians), Offices of Physical, Occupational and Speech Therapists and Audiologists, Offices of Podiatrists, Offices of All Other Miscellaneous Health Practitioners, Ambulance Services) - max $6.5 millions of dollars
 
Nursing Care Facilities, Continuing Care Retirement Communities - max $12.5 millions of dollars
Residential Mental Retardation Facilities - max $9.0 millions of dollars
Residential Mental Health and Substance Abuse Facilities, Homes for the Elderly, Other Residential Care Facilities, Social Assistance - max $6.5 millions of dollars
 
Arts, Entertainment and Recreation - max $6.5 millions of dollars
Accommodation (including Hotels (except Casino Hotels) and Motels, Casino Hotels, Bed and Breakfast Inns, All Other Traveler Accommodation, RV (Recreational Vehicle) Parks and Campgrounds, Recreational and Vacation Camps (except Campgrounds), Rooming and Boarding Houses) - max $6.5 millions of dollars
Food Services and Drinking Places - max $6.5 millions of dollars but $19.0 millions of dollars for Food Service Contractors
Repair and Maintenance - max $6.5 millions of dollars (but Computer and Office Machine Repair and Maintenance - max $23.0 millions of dollars
 
Personal and Laundry Services (including Linen Supply, Industrial Launderers) - max $13.0 millions of dollars
Personal and Laundry Services (including Barber Shops, Beauty Salons, Nail Salons, Diet and Weight Reducing Centers, Other Personal Care Services, Funeral Homes and Funeral Services, Cemeteries and Crematories, Coin-Operated Laundries and Drycleaners, Pet Care (except Veterinary) Services, Photo Finishing Laboratories (except One-Hour), One-Hour Photo Finishing, Parking Lots and Garages, All Other Personal Services) - max $6.5 millions of dollars
Personal and Laundry Services (including Dry-cleaning and Laundry Services (except Coin-Operated) - max $4.5 millions of dollars
 
Religious, Grantmaking, Civic, Professional and Similar Organizations - max $6.5 millions of dollars
 
If a potential borrower is close to these standards, size eligibility should be discussed with the local SBA office. Also note that the standards for a particular business may change from time to time and some exceptions do apply.
 
Uhhhh… I’m done with this…It took much more time when I thought at the beginning.

Today’s franchises are much alike to set a code of conduct. Whereas ages ago there were knights’ code, chevaliers’ code, mason code or just gentlemen code it has transformed for today.
It’s the franchisor who dictates the franchisee all the way he should perform the business.
Is it good or bad? Does he have the rights to do so or is it humans’ rights violation.
I think neither. Just the same as knights from Middle Ages you have the right to choose the franchise you like most. You could start your business with your confederates – the guy thinking just the same way you do. And nobody forces you to do the things you don’t like. You just have to choose properly…

By the way I wanted to write a message concerning smoking. I’ve found the information that last month Marriott International Inc., the large U.S. franchise hotel chain, is banning smoking in all its U.S. and Canadian facilities. The new policy includes all guest rooms, restaurants, lounges, meeting rooms, public space and employee work areas. Currently more than 90 percent of Marriott guest rooms are non-smoking. The information seemed interesting to me and I decided to make a little research of franchises that are prohibiting smoking.

I’ve found a lot of companies (mostly hotels and restaurants) that are struggling against smoking.

McDonalds has adopted a non-smoking policy for all modern restaurants in 1993. This existing non-smoking policy was adopted by most of its franchises.

The Spudulike Group has had a no smoking policy in all its managed stand alone restaurant units.  This policy is directly linked to the fresh and healthy nature of the core baked potato products.

The Hard Rock Café in the US has a no smoking policy as it’s the law. Whatever the law is for that particular country Hard Rock goes with that.

The Wagamama chain is smoke free throughout its 21 UK restaurants.

Kentucky Fried Chicken and Pizza Hut, has announced that all of their restaurants will be smoke-free by the 17th of August. The company operates 1,200 KFC and 1,675 Pizza Hut restaurants across the country. They are also encouraging their franchise owners to adopt the same policy for the nearly 4,200 franchised restaurants.

Hmm… I wonder if they are doing so just because they really think that way… Or they are moved to that by franchisors.

Anyway as I’m no-smoking-supporter I like they way the franchise system changes the world.

Today I’ve talked to my former classmate who was the franchise owner for at least the last five years or maybe even more (as I don’t know if the franchise we were speaking about was his only one). When he learned that I was editing my personal franchise blog he told me an interesting fact from his business experience. It can be useful while studying a prospective franchise agreement.

So my friend is the owner of a small franchise business related to food industry. When he was choosing the franchisor company to work with he spent a lot of time comparing different franchise agreements. At least he opened a small restaurant and was enough happy as the main company provided everything that had been promised for the initial fee. By the way the fee also was not too high, and as a result my friend had almost no problems with finances for his new business. I need to say that he was an enterprising person with good knowledge of business and marketing. And not only this! He was enough lucky on the one hand, and far-seeing on the other hand to surround himself with good specialists. So the result was even better that promised by the official statistics for that kind of franchise business in that region. He was happy. He managed not only to earn money operating his personal company but also he was doing something for people, he impacted their lives by selling good products they really needed. In a short time he had a lot of clients, and many of them recommended his company to their friends and relatives. It was like a business paradise…

As usual in true life stories then comes a huge BUT.
But as some time have passed he found his business going to shutdown. He really could continue it but the overall situation in that area moved him to make the decision of closing. What has happened with that prospering business?

Unfortunately the business of my friend was destroyed by his franchisor. How could this happen you may ask. Is there any franchisor that is willing to annihilate its milch cow? No, for sure. But the situation could become reality for most franchisees.

One day my friend has found another restaurant of the same franchisor opened not far from his place. The franchisor company has conducted a kind of analysis and found high profitability of business in that region (it was for sure… My friend has slaved away in order to make it so profitable).  And as a result they gave an advice for their next franchisee that he could start his business in a very profitable environment.
As a result my friend has lost a considerable part of his clients who were not devoted to his place so much. He had even lost some of his regular customers. They decided that another restaurant is a product of my friend’s business development. So they have thought that there’s no difference between that two places.

My comment to this story is the following:
Read your franchise contract very carefully. You should examine it on the topic of yours and your franchisor’s business rights. And there should be a statement on the area you are working solely at. You shouldn’t agree to start a business in the area inner competition could destroy your business.

The first legislative act I want to write about will be the Small Business Franchise Act (the SBFA). I’ve read its statements and decided to range them according to their importance (as I think) for small business in general and franchise business particularly.
 
That Small Business Franchise Act was signed in 1999 after it raised heated debate. The proponents believed that the Act was necessary to protect the rights of small franchisees and to create favorable conditions for their development. But opponents insisted that this bill is only a waste of time and tax money as there was the good franchise legislation on the one hand, and the good small business legislation accompanied by different government supporting programs. Anyway the bill passed and I’m going to say some words about its content.
 
The first (not by the order but by its importance according to my opinion) statement of the Act protects the franchisee against unlawful transfer of the business. I think this to be very important because in the most cases franchisee is very dependent on the franchisor’s behavior according to their agreement. I’m not against this dependence but in the case when franchisor decides to sell his business, or to merger the new owner can easily forget about the rights and problems of franchisee (especially if we are speaking about a small business). So the SBFA guaranties that franchisees would be given at least 30 day’s notice of the franchisor’s transfer of ownership to another entity. I want to draw attention to the number of days. To my mind it’s very good that the bill not only makes franchisor to provide the information but also establishes the period of time. It would help franchisee to prove that his rights were violated.
 
The second statement I want to speak about protects the franchisee from unreasonable termination. As I understand this guaranty is rather close to the previous one. It will protect the small company from franchisor’s groundless decisions. According to the bill the main company has to provide a good cause to explain why it doesn’t want to continue business relations with franchisee. At the same time a compulsory 30-day period must be given to the franchisee to cure any defaults. The only thing I need to mention here is that I have a doubt that 30-day period would be enough in some difficult cases (for example in the situation when companies are located in different countries). Anyway according to the Small Business Franchise Act after that period both companies have the rights to turn to the court.
 
The third very important part of the Act ensures procedural fairness in the relations between franchisee and franchisor. It means that the conditions of the Small Business Franchise Act are more important in comparison with the conditions of the agreement between the main company and its small franchisee. Nothing in the agreement can limit or eliminate any of the franchisee’s rights.
 
The number four in that list imposes limited fiduciary duty on the franchisor. In English it will sound like this: “Franchisor must provide financial information about their activity to the franchisor”. Why? Because franchisee’s business results depend on franchisor’s decisions and financial decisions are not an exclusion. But is it fair toward franchisor? Yes, because he will provide a full disclosure of disbursements and a full accounting only for the money received from franchisee. The main company must not provide any co-called secret information, or information about long-term investment in some projects that have no connection with franchise business at all.
 
The fifth important part of the bill is dedicated to relations between the franchisor and the franchisee after the franchise agreement has expired. This regulation protects the rights of both parties. On the one hand, it permits the former franchisee to continue business activity in any sphere and at any location. On the other hand, the bill prohibits using the franchisor’s intellectual property, trademark, or any other commercial or business secrets. Why do I consider this part of the Small Business Franchise Act to be less important than the previous ones? Because I really believe that every clever franchisor will include the same point in the franchise agreement and the Act only provides additional guaranty.
 
OK. I’ve reached the middle of the list of the important regulations in the SBFA. Let’s go forward! In the sixth part I’ll speak about trade relations between the main company and its franchisee. The authors of the bill decided that they needed to guaranty the freedom of any franchisee while buying goods and services for the business purposes. It means that it’s illegal for franchisor to include in the franchise agreement the point saying that franchisee is obliged to purchase raw materials, equipment, other goods and services only from the main company. I like this statement but don’t think this to be so important than the previous ones. I really think that freedom is a good thing but as I understand the franchisor has an incentive to provide beneficial conditions for franchisee to attract him and it’s better to buy from the main company and save some money on transactional costs.
 
The next item of the Act is very sound but a little bit naïve as I think. That’s why I gave it only the seventh place in my list of importance. It speaks about common to all mankind values as honesty, good behavior and good faith. The Small Business Franchise Act insists that every party in the relations has to “act honestly and in good faith with each other and observe reasonable standards of fair dealing in the trade”. But how measure the level of honesty, reasonability or faith? I have no idea…
 
 
 
Three more left… Brace up! The SBFA also says some words about the relationships with government and local authorities. The Act gives the right to an attorney general of any state interfere in the transactions between the franchisor and the franchisee by bringing a civil action on behalf of its residents in an appropriate U.S. District Court. It can happen if the government official believes that that the SBFA is being violated. I put it on the eighth place because I think that the same statement characterizes every legislative act. I mean that to ensure the law is the main role of every government. Am I right?
 
The last two statements are the least important. The first of them determines that small business franchisees have the right to form and to participate in trade associations. And the last statement of the bill acts as a slogan as I think. It establishes that perpetrating a fraud within the franchisor-franchisee relationship is prohibited. It’s not more than a remainder of the statements of the other general business laws.
 
At the end of my comments to the Small Business Franchise Act I want to remind that this list of more or less important regulations of the bill is only my personal point of view. Can anyone introduce his or her list? I will be very happy to hear any grounded ideas.

The friend of my parents at last decided to franchise… And as he is rather ambitious person he wants to choose among the top and the most well-known. He looked around and found nothing better than 7-Eleven, Inc.
 

I was asked to collect as many as possible facts about this franchise (he is not so good in Internet). It was not difficult and I decided to publish this information in my blog too (to kill two birds with one stone).
 

Industry:
Food
 

Franchise package includes:
a) initial training to franchisees on how to operate and manage their stores; training includes practical part of 6 weeks working in one of the stores;
b) operational consulting, assistance and help in all business aspects; meetings every week;
c)  franchisor develops the building, provides the store equipment and pays the utilities.
d) franchisor owns or leases the land;
e) franchisor provides credit resources on everyday basis if needed;
f) franchisor prepares all financial documents (income statements and balance sheets, financial activity summaries (e.g., daily sales receipts, purchases, cash expenditures) and even some marketing reports; everything operates under special information computer automated system.
 

Fee:
a) initial franchise fee to 7-Eleven (averaging approximately $70,000, depending on the store’s gross profit, but that may vary significantly depending upon the area);
b) a typical initial cash payment is about $83,000, which includes a down payment on the store’s opening inventory, supplies, business licenses, permits, bonds, cash register fund and the initial franchise fee.
 

Franchisee rights and responsibilities:
a) store business decisions are made by the franchisee himself but he can turn to franchisor for advice in any business sphere;
b) A 7-Eleven franchisee does not own the property, store or equipment, but leases or subleases it from 7-Eleven, Inc. as part of the franchise agreement.
 

So the program is OK especially for those who have poor economic background. You are not responsible for financial documentation, credits, real estate and equipment. But at the same time this franchise provides you too little freedom. Do you agree to obey all the time? If so, the business is right for you.

Yesterday I wrote an article about sources of financing for a franchisee. And an interesting thought came to my mind. I was thinking about some associations and unions and their role in economic development.
 

Just think about it a bit. Small business companies have very little power to influence the legislation of the US or any other country. Even when they understand the necessity of some changes or improvements they are too small, too busy and don’t have enough money to protect their rights. As a result, 2-5 big companies have all the possibilities to lobby legislation favorable for them. They can put into operation new tariff or promote necessary educational program.
 

The only way out for small and medium-size companies is to become organized. And we can see this in almost every country in the world. The activity of different Small Business Associations and Unions of Entrepreneurs is a great power that can be one of the guarantees that protect competition.
 

But what about franchising? Yesterday I realized that franchisee can get the benefit of lobby twice! On the one hand as a representative of small business, and on the other as a representative of Franchise Association.
 

It seems for me that I found an additional benefit of franchising!

“We are not so rich to buy cheap things,” the proverb says. Is it right about buying a franchise? Maybe… But before choosing between the high-cost and low-cost franchise in the same industry, I suggest you to think over the following information.
 

When you buy the low-cost franchise, the franchisor will never provide the same start-up assistance, training, advice or preferences as if you were investing in the high-cost franchise. So, one of the first questions you have to answer to yourself is to decide what assistance you REALLY need.  If you are a complete novice at this business, I think that it would be better to get a bit more (and to pay more too). But if you are only expanding your rather successful business, the information and assistance (that every franchisor must provide) may be absolutely enough for you.
 

So, it means that you have to know what help you’ll get for sure according to legislation. All the rest depends on franchisor’s willingness.

According to the FTC, franchisors must provide:

1. One copy of the Uniform Franchise Offering Circular. You’ll get it in at least 10 days before you sign the agreement
   
2. One copy of the franchise agreement, other contracts and franchisor’s financial statements with estimates of initial start-up costs (operation capital, equipment, construction and rent costs and so on)
   
3. At least one week of practical training for you and your manager in a parent company
   
4. Operational manual
   
5. Ongoing support
   
6. Guidelines on audits and assignment procedures
   
7. Other criteria for assignments, such as ownership rights and rights to sell the franchise
   
8. Initial fees, royalty and other costs information
   

At the same time your potential franchisor may provide some additional help. You need to take into consideration that this usually increases your payments. This additional assistance may include:

1. A marketing plan, promotional materials and site selection assistance
   
2. Adequate insurance for fire, inventory, burglary, workers’ compensation, accident and health, occupancy and general liability
   
3. A known trademark or service mark, or advertising to make it known
   
4. Guidelines on purchasing inventory and equipment, restrictions on goods sold and terms of agreement and renewal
   

The last word about “must” or “should”: remember that in different states and countries the franchise legislation is different. Spend some time to check your rights as a franchisee. And maybe you will change the proverb for yourself: “We are not so rich to buy high-cost franchising and to pay for the help that we don’t need!”

While searching the web I met a lot of advices how to choose the best franchise. So, I decided to create a test that can be helpful during the franchise choosing process. I ask you to be charitable… and your comments are highly appreciated.
 The rules of the test:
-try to be as honest as possible;
-you have to answer all the questions;
-each answer ranges from 1 to 10 points;
-for every question I provide an explanation of the lowest and the highest variants but you can choose any in between.
 

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 QUESTIONS:
A. Does the Franchise meet your own personal and financial objectives?
1 point for – absolutely no;
10 points for – perfectly.
 

B. Does the Franchise represent the industry or business sphere that you like?
1 point for – you were never interested in that sphere;
10 points for – this was your lifelong ambition.
 C. What do you think about the franchisor’s company and/or people?
1 point for – you know little about the company and the people or you do not trust them;
10 points for – you trust the company and the people and you believe they have enough knowledge, expertise, financial resources, and commitment to develop and improve a business.
 

D. What is your attitude to products and services offered by your possible franchise?
1 point for – you never tried the products yourself and you think it’s strange why people spend money for them;
10 points for – you like that products yourself and you are sure that they will be demanded by consumers during the life of the franchise.
 E. Are you satisfied with what will you get for you franchise fee and royalty payments?
1 point for – you feel that franchise fee and royalty payments are too high and you are sure that you can spend that money much better yourself;
10 points for – you see that franchisor is ready to provide programs, guidance, and other forms of assistance which you are persuaded and all that programs are worth the money you pay to the franchisor.
 

F. Is franchisee protected from legal side?
1 point for – the agreement protects the franchisor’s rights but says nothing or very little about franchisee;
10 points for – your lawyer states that franchise agreement covers all the possible situations in your future business.
 G. Have franchisor provided you a disclosure?
1 point for – not at all or it contains the information that you can’t believe;
10 points for – you are completely satisfied with the disclosure.
 

EXPLANATION
0-30 – this Franchise is not right for you;
31-50 – you may continue thinking about this business but I suggest you to ask for advice and to study it better;
51-70 – you can do the next step toward buying this Franchise.
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 I ask everybody to evaluate my ‘Franchise test’ and send me comments. Thank you in advance!

The eBay company continues to change the common point of view on Internet-business. At first they showed us that everything could be sold on the Web – goods, services, whole businesses and even the rights (for example, the right to give a name for a baby). Then they showed us that this can be a profitable business not only for themselves but for everybody who wants to spend time bidding. And now they introduce a franchise mechanism for those who wants to continue building the business with eBay.
  EBay franchise is more commonly called Ebay Drop Off Stores. The main idea lies in allowing ordinary people to drop off items to be sold on eBay on a consignment basis. Why don’t they do this themselves? Because some have no enough knowledge in computers and Internet, some have no digital camera or they are too busy for this. Usually they agree to pay a commission in the 30% - 50% range.
 But what are the benefits for professional sellers or producers? Why would they pay a commission instead of hiring a person or doing themselves? There are several reasons for this.
1. The procedure of selling on eBay takes time. It usually includes taking photos, posting the listing, responding to messages, collecting money, packing the item or items and shipping them. So, every businessman has to make a decision whether to outsource this service or not. The same happens when you need a lawyer – you can hire one or more or you can turn to a special company only when you need help
2. Professional eBay sellers know how to sell, they have experience and usually they have references that help them to get higher prices on eBay.

If you believe in people’s honesty this message will be of no interest for you. All my thoughts about protecting the rights of franchisor can even irritate you. For the rest I’m going to provide some analysis on weaknesses and treats for franchisor. I hope it’ll be interesting for many and useful at least for anybody.
 

Statement #1.
The most vulnerable are franchisors working in café and restaurant business. At the start-up period franchisor provides franchisee with almost everything: information on what equipment to use and where to buy it, commercial secrets and recipes. He helps to purchase the equipment and to decorate the hall. Can franchisor do less? Seems no… Otherwise a new café or restaurant will not be a part of a chain.
After agreement or license expires the former franchisee can easily change the name and some nuances in style (just the colors of walls or window curtains) and continue to work using the same equipment with the same qualified and trained personnel. And the most important fact is that they can continue serving the same loyal customers.
It works especially for small towns that are far from the city of franchisor’s headquarters. Former franchisee can easily study the local market, improve some details or adopt them to the local traditions. In most cases customers even will not mention changes in the name or colors. And everybody will be satisfied with lower prices caused by possibility not to pay royalty or other fees to franchisor.
What can be way out for poor franchisor? The first step is to take out a patent or author’s rights for all parts of technological process and recipes. At the same time a good help can be wide and well-developed advertising campaign and brand promotion. The last can create additional benefits for franchisee and he will extend the agreement.
 

Statement #2.
Sometimes franchisors do not pay much attention while developing their franchise proposal and agreement. Why? Because when you sell you first franchise license you usually sell it to a person you know (friends, neighbors, customers and so on). And you trust them. But when your business develops sometimes you may forget to make changes in the agreement for a “complete alien”.
The way out? Not to be so credulous and unsuspecting. You NEED to hire a lawyer.
 

 Statement #3.
Franchise in the sphere of production can be protected more easily. In that kind of  business franchisor usually supplies some special or even unique ingredients or components. As a classic example I can mention Coca–Cola, Pepsi, Schweppes. Their partners get concentrates but have no idea what they are made from.
But you have to remember that this will work only if your recipe or technology of production is really unique. In other case your franchisee will easily get your secret and bye-bye.
 

 Statement #4.
Cooperation with franchisor has to be beneficial for franchisee not only at the first stage (when they sign a contract) and during many future years. And franchisor has to think about this the whole time. He can provide a favorable credit to franchisee to buy the equipment, can agree to postpone the payment for materials and other stuff , can provide additional services and so on.
 

Statement #5.
You can consider yourself a protected franchisor if your franchisees sell your unique products. It happens in the sphere of fashion and design and others when your franchisee is not more than a seller or distributor. 
I can state that you are in desirable position.
 

Do I have more statements? Yes… And you? I’m waiting for your comments…

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