Scott Capital Consulting provides two principal services. We help investors acquire and create franchises. With a passion for creating value and reducing risk, Scott Capital Consulting helps investors achieve their objectives.
Buying a Franchise:
Due Diligence for
With more than 750,000 franchises in the United States in 2019, investors are more likely to buy a franchise than any other small business model.
Created to help investors make informed decisions about the deployment of investment capital, Scott Capital Consulting is available to perform legal and financial due diligence on franchises being acquired by investors and small business entrepreneurs.
Title 16 of the Code of Federal Regulations Section 436, better known as the Federal Franchise Rule, which is published by the Federal Trade Commission, requires franchisors to disclose twenty-three (23) items of information in a prospectus called a Franchise Disclosure Document (FDD). The FDD is designed to provide prospective franchisees with enough information to know whether a viable business opportunity exists. It also defines acts or practices that are unfair or deceptive in the franchise industry in the United States.
Scott Capital Consulting completes a comprehensive review to determine the legal and financial viability of the proposed franchise while providing the data necessary to stress-test the investor's conclusions regarding the acquisition. We turn legal and financial data into information to clarify whether the franchise you are targeting can help you achieve your investment goals and objectives.
Constructing a Franchise:
Identifying and Packaging
a Scalable Intangible
In order to franchise a business you need two things: operational scalability and legal compliance - in that order. Scott Capital Consulting is available to help small businesses comply with the state and federal regulations that greenlight the sale of any franchise. More important, however, we help small business owners identify their secret sauce and package the scalable aspects of their operations.
Scalability is the essence of the franchising. To scale, a small business must have a distinct feature that gives it a competitive advantage which can be replicated, protected, and which keeps franchisees dependent. Let's take McDonald's, for instance. Going back to when the business was started in 1948, the scalable aspect of the McDonald's operations was speed to market with a uniform, commercially-polished product mass-produced by unskilled labor. In essence, that's the McDonald's system and it was revolutionary in the late 40s and 50s. It's an intangible that created the Quick Service Restaurant (QRS) industry and made McDonald's corporation billions of dollars in the process.
Many QSRs use the same system with slight distinctions. Burger King uses the same system with the distinction of flame broiling. For KFC its the Colonel's 11 Herbs & Spices. For Chick-Fil-A its a specific method of pressure cooking that makes their chicken crisp and juicy. Our job is to help you find and package the intangible that makes your business scalable. Call today for a scalability review.
One of the most rewarding aspects of sell-side franchise work is helping entrepreneurs turn seemingly simple insights into big companies. It would be a joy to help you grow your small business into a national or global brand.
Creating a Franchise:
Drafting/Registering the FDD
Once a scalable concept has been proven, the next step in the franchise creation process is to create the documents that will comply with the state and federal regulatory requirements. Fourteen (14) states have registration requirements where approval must be granted prior to selling franchises in the state. Nine (9) states have filing requirements where approval is not required to sell franchise agreements within the state.
Scott Capital Consulting is available to draft and register the FDD that must be registered and filed with state authorities around the country. We are also available to draft the franchise agreement, and other critical documents, that govern the franchisor-franchisee relationship.
The regulatory and registration process breathes the breath of life into the franchise concept. Scott Capital Consulting is available to help franchisor achieve and maintain ongoing compliance with state and federal regulations.
Due Diligence for Small & Middle Market Business Acquisitions
Think of it this way. When you buy a franchise you're buying a business that comes with a lot of information, guidance and a little bit of control. When you buy a non-franchise business, you're buying a company that comes with total control without any information or guidance.
Asymmetrical information is the most significant challenge for investors buying small or middle market non-franchise businesses because there's no law requiring the seller to provide critical information on whether the business is viable. The seller has all the information and the buyer has to request the information needed to make an informed choice. Without that information, investors won't know whether they are buying a viable business or someone else's problems. That's where we come in.
Scott Capital Consulting is available to perform legal and financial due diligence on small and middle market businesses being acquired by new entrepreneurs, angel investors and private equity firms. We're here to help by ensuring that the information requested and analyzed addresses the risk inherent in the business because not all businesses are the same.