6.3.1 Business License, Entity Name Approval, Proof of Insurance and ACH

Business License:

There should be a copy of the franchisee’s business license in a file you maintain (the same file/location you’d manage their Pre-Opening Checklist).

Entity Name Approval:

You should make sure that your franchisee’s entity name is approved by the state, is valid, and doesn’t have your brand name in their entity name. Never allow a franchisee to include your name in their entity name because they do not own the name, you do. They’re licensing the name from you, and if you allow these entity names to be used, it starts to weaken your mark, and you start to lose your ability to enforce and protect it.

Proof of Insurance:

Make sure you have a copy of each franchisee’s current insurance certificates and that it contains the proper amount of coverage that you require and state within your FDD. If a type of insurance you require involves regular policy updates over a period of time, be sure to set yourselves reminders so you can obtain copies of any new insurance certificates for your records.

Automated Clearing House (ACH):

An ACH form authorizes your access to draw royalty and other fees from the franchisee’s account, directly. The information you use for an ACH when collecting your franchisee fee might be different from the one that you will be collecting on-going royalties or fees. Confirm the routing numbers you have, to start billing the franchisee, is accurate to avoid financial record keeping issues. Once confirmed, make sure this data is on file, remains current and protected.