Small Business Matters

[#1]

How do you know when you’ve found the right franchise for you?

Maria Anton (www.growbizmedia.com) is an expert in this area. She has outlined 10 Signs of a Great Franchise Opportunity that include the following vital key indicators that will help you know when you’ve found the right franchise:

1. Industry growth
2. Unit growth
3. Strong support from the franchisor
4. Good management
5. Marketing and advertising support
6. Satisfied franchisees
7. Adequate earnings

8. Sound financial statements
9. Honesty
10. A good fit

To determine how your chosen franchise stacks up against this list you’ll need to do some detective work.

The franchise sector is regulated by the Federal Trade Commission (FTC) and, in light of this, the government provides some useful resources and advice designed to help prospective franchisees evaluate and buy a franchise, while avoiding common scams.

Below is a summary of what the law requires to help you assess a franchise opportunity, as well as steps you can take yourself to assess a franchise opportunity:

Detailed Disclosure Document - It’s the Law!

As a general rule, the government requires that franchise owners (the franchiser) provide you with specific information so that you can make an informed decision - this is known as the Federal Trade Commission's Franchise and Business Opportunity Rule.

Key to this rule is the responsibility of franchisers to provide potential franchisees with a "Detailed Disclosure Document" during the pre-sale stage. This is an essential piece of information that can provide valuable insight into your chosen franchise.

The detailed disclosure is required to contain the following:

• Contact information for at least 10 previous purchasers in your area
• An audited financial statement
• Executive profile information
• A true view of the business start up and maintenance costs
• An outline of respective franchisee and franchiser responsibilities

The document must be provided at least 10 business days before you pay any money or legally commit yourself to a purchase. If you have any doubts about whether a franchise owner is being less than forthcoming in sharing this information, the FTC provides a hotline for you to call: 1-877-FTC-HELP (877-382-4357).

Do Your Own Investigative Work to Assess a Franchise Opportunity

The law can help keep a franchiser honest, but there are some steps you can take on your own to assess a particular franchise opportunity.

• Put the Disclosure Document to Work for You - Once you’ve received the disclosure document from the franchise owner read through it and follow up with all the contacts and references that have been provided. It’s best to interview franchisees in person. Ask about their experiences and compare their responses to the statements in the disclosure document.

• Do the Potential Earnings Figures Stack Up? - Investigate whether claims about your potential earnings are genuine. You can do this by asking for a copy of the basis for these claims in writing. Again, this is something you can also gauge when you talk to existing franchisees.

• Check out Success Stories - The franchiser must tell you (in writing) the number and percentage of owners who been as successful as they claim you will be.

• Compare Opportunities - As with all business ventures, shop around. There are many online resources that offer to connect you with available franchise opportunities but you may want to check out the government-produced and authorized Franchise Opportunity Handbook (published by the Department of Commerce), which lists companies that provide franchise opportunities. 

• Don’t Give in to Sales Pressure - The FTC requires that a seller must wait at least 10 business days after giving you the required documents before accepting payment or a signed agreement.

• Compare the Contract to the Verbal Sales Pitch - Don’t sign any contract that doesn’t mirror the promises that have been made to you at the pre-sale pitch.

• Employ Professional Help - An attorney - preferably a specialist in franchise law - can help you evaluate the franchise package and tax considerations.You might even consider using an accountant to determine the full costs of purchasing and operating the business as well as assess your potential profit.

Get more information about evaluating franchise opportunities as well as your legal rights at Business.gov’s Franchise and Business Opportunities Guide, which will also tell you exactly what rules apply to the company selling you the franchise. The more you know about their requirements, the better informed you are when evaluating their opportunities.

Additional Resources

• Small Business Franchise and Business Opportunities Guide - from www.business.gov.
• Buying a Franchise: A Strategic 101.
• International Franchising Association - IFA represents all aspects of the franchise community and works to protect, enhance and promote franchising.
• The Franchise King - Rich with franchise information, resources, products, and services. If you are a prospective franchise owner, you’ll find the resources you need to help you lower your risk. If you are a franchisor, you’ll find great resources to help your franchise system continue to flourish.
• Buy a Franchise - Guides and Resources from the Small Business Administration.
• Allbusiness.com Franchise Guide - Tips and advice including articles, videos, and business tools.

Message Edited by CaronBee on 05-28-2009 07:49 AM

Message Edited by CaronBee on 06-01-2009 04:04 PM

[#2]

Exellent!  I will bookmark and refer others.  Thank you for this.

Mike

[#3]

One Word for a Good francise.   MCDONALDS!

you can't go wrong with Mcdonalds as hard as you try!

[#4]

@fatbikez: So you're saying, we shouldnt go with any other franchisee??

I'd say research a little online because web can do wonders in finding information for you!!

-

Jay M

Aftermarket Journal.com

Message Edited by NicoleD on 09-08-2009 11:45 AM

[#5]

Great article, I would be interested in franchise that has anything to do with online marketing, I am looking for such investment

Birmingham Escort Agencies

Manchester Escort Agencies

Message Edited by NicoleD on 09-08-2009 11:44 AM

[#6]

francise is the one kind of bussiness line that has a lot of advantages..... if you have a will..... i'm sure that you will success ... you can reach the McDonal level of marketing....

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[#7]

Any person considering starting a business should also be aware of the fact that it can take a considerable commitment to make it succeed.  Many business owners can work as much as 12-16 hours a day to get it started. Don't ever go in to business for yourself unless you are able & willing to make the commitment that is necessary, no matter what it takes.  

[#8]

Hello! I do not see a condition of use of the information. Whether it is possible to copy the text written by you on the site if to put the link to this page?

my email 47shveden@gmail.com
my site: satellite tv

Message Edited by NicoleD on 09-08-2009 11:44 AM

[#9]

santamaria - see this link for info about use of the copy http://www.business.gov/about/policies/

[#10]

I wish I was this thorough when i bought my franchise years ago.

I lost money and wasted a good year of my life. I guess I was lucky enough to be able to walk away after one year.

Guaranteed treatment for warts

Message Edited by NicoleD on 09-08-2009 11:45 AM

[#11]

I have to agree with the McDonalds franchise comment. There is no going wrong there!

Believe it or not, there are many cities that could still use a McDonalds due the cheap cost to customers. It is cheaper eating at a McDonadls than eating at home most of the time!

Matt

Term Papers

[#12]

Thank you very much for hotline phone. However, it is more useful to know the names of people who have bought the franchise licence of the particular company. Or detective companies who work in searching of such an information. 
  <a href="http://www.nextonmarket.com">NextOnMarket business search engine</A>  

[#13]

As economic growth in 2000's there were many business opportunity, one of was frachise. Franchise can be new model of trading. In common trade, if we open new business we must set up everything from the beginning until it will ready. In franchise we son't need that, cause there are management will setup everything, but we must pay for that. So it really need to think which franchise can be profitable. We should analyze this before do the action.

Message Edited by ZanetaB on 09-15-2009 10:28 AM

[#14]

Very interesting article, was a good read. Thanks.

Message Edited by ZanetaB on 09-17-2009 01:34 PM

[#15]

Wow! Very exellent. I'll tweet this one for others to read. This could help alot.

Business is really a big thing.

blietzkrieg

Message Edited by ZanetaB on 09-23-2009 11:52 AM

[#16]

Very usefull atricle definatly key facts and advice for the new busness.

London mobile DJ

Surey Mobile DJ

Message Edited by NicoleD on 09-30-2009 11:07 AM

[#17]

Information just at the right time. I have been investigating this recently. This site is great for advice and helpful information.

Sydney

Message Edited by ZanetaB on 10-05-2009 11:34 AM

[#18]

Very informative! Thanks for sharing!

Regards,
Michael Guilfoyle

SQL Server on Windows Hosting

Message Edited by ZanetaB on 10-06-2009 11:40 AM

[#19]

McDonald's was my first job in 9180 and still a good franchise opportunity today, but the pre-conditions make it almost impossible to own one.  You must have a LARGE amount of cash already and as with almost all stong franchises, they want to see that you are already successful in other areas of your business life. 

Franchises like Chick-Fil-A offer a franchise opportunity for only $5,000 investment.  So, unless you have several hundred thousand dollars in cash and/or collateral don't think that you can just plop down $1k and own a multi-million dollar franchise.

Remember that you will also be required to be an owner-operator and not have other interests.  They want to see that their franchisees are working hard at their company and not just letting the "kids" run the place.

Large companies like McDonald's and Chick-Fil-A also have territories blocked off so that some expansion is prohibited to give other franchisees a "fighting chance" in their respective areas.  Typically 5-7 miles between franchisees is not unheard of and sometimes the larger metro areas are "off-limits".  You might have a better chance at a small-town, big-name franchise.

Jeff Tomczak

Show Your Colors Flag Company

<a href="">

1-800-437-3524

Message Edited by NicoleD on 10-11-2009 11:15 PM

[#20]

Very interesting read! Some very good points mentioned, thanks.

Message Edited by ZanetaB on 10-12-2009 10:22 AM

[#21]

Many business owners can work as much as 12-16 hours a day to get it started. Don't ever go in to business for yourself unless you are able & willing to make the commitment that is necessary, no matter what it takes.

Regards Finanzberater

Message Edited by ZanetaB on 10-14-2009 02:09 PM

[#22]

I looked into a Subway franchise, but I read too much online from disgruntled ex-subway franchise owners.  I also read up on the lawsuit from franchisee's about the "marketing budget".  I even contacted a few current franchise owners and received mix reviews.  I tried to follow these ten steps as much as possible, and ended up not doing the Subway franchise.  I am still in the process of looking but it is tough to find a franchisor that supports it's franchisee's in every aspect.  

[#23]

Excellent article! Will definitely remember this information for future use. Many thanks! charlotte real estate  for sale by owner 

Message Edited by NicoleD on 10-28-2009 10:46 AM

[#24]

I have just purchased a franchise today. i hope it will give me good profit.

Apex Professionals LLC

Message Edited by ZanetaB on 11-02-2009 12:31 PM

[#25]

Hmm very nice ideas. It is really great work that you are doing. I m totallly agreed with your oints and ideas. It will be very beneficial for peoples to live securly.

Message Edited by ZanetaB on 11-02-2009 12:32 PM

[#26]

It was very helpful article thank you so much for sharing.

Message Edited by ZanetaB on 11-02-2009 12:30 PM

[#27]

Thanks! These are some fantastic tips for choosing a franchise. You covered every avenue without making it too complicated. Good stuff!

[#28]

I agree too with McDonadls franchise, but it also depends on the nature of business or field like if we look for telecommunication business so they have different nature of business as compare to food business so its depends upon your selection..

Regards,
Jack Balboa
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Message Edited by NicoleD on 12-02-2009 10:21 AM

[#29]

Thank you for the sensible critique. Me & my neighbour were preparing to do some research about that. We got a good book on that matter from our local library and most books where not as influensive as your information. I am very glad to see such information which I was searching for a long time.This made very glad.

Thanks

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Message Edited by NicoleD on 01-25-2010 11:45 AM