Franchising

 

The desire to run a business runs deep and wide in the United States. Some people just want to be their own boss. Additionally, as big corporations have laid off long-time employees, replaced people with machines, or sent jobs to lower-cost countries, workers have sought a way to make a living that can’t be taken from them. If they have never run a business, they often look at franchising as a guided path to success.

Most importanly, understand that franchising is not a guaranteed success. You must be an informed franchise buyer. While the Federal Trade Commission and several states require franchisors to disclose information about a franchise offering, most government agencies do not verify the information. Don’t just read the Uniform Franchise Offering Circular, double check its accuracy. Above all, talk with other current and former franchisees of a system before buying.

If you are unwilling to put in the time and effort to research a franchise before buying, you will probably be unhappy with the purchase. If you do not take a hard look at the negatives you inevitably uncover in any franchise you research, you are likely to be exploited or disappointed.

Pay the money to have an attorney help you understand the franchise contract and protect your rights. You are unlikely to be able to negotiate much change in the contract individually, but look for an agreement that the franchisor has negotiated with its franchisee advisory group.

Understand what you’re getting for your money. It is not true that the FTC prohibits franchisors from making earnings claims. The government agency encourages such disclosure, but does require that these claims be accurate and puts such demanding requirements on those claims that many franchisors won’t attempt to comply.

Understand your responsibilities as a franchisee. If you don’t like the terms of the franchise contract, it’s better to walk away than think you can do things differently. Once you are part of a franchise system, you are obligated to follow the system and to help it succeed. You will probably work harder than you did as an employee. You will move outside your comfort zone: If you are uncomfortable building relationships and selling, get over it; if you never had a head for financial statements, learn. If you won’t take this advice, then don’t become a franchisee.

 

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