Want to be your own boss?
Thinking of a franchise or business opportunity may sound appealing, especially if you have limited resources or business experience. However, you could lose your money if you don't investigate a business carefully enough before you commit. By obtaining a copy of the franchisors Franchise Disclosure Document will give you specific information to help you make a well informed decision.
You can use the disclosure document to compare a particular franchise with others you may be considering or simply for informational purposes.
To help you make your decisions, you should interview current owners in person if possible. (They should be listed in the disclosure document.). Don't rely on a list of references selected by the company because it may contain biased participants. Ask owners and operators how the information in the disclosure document matches their experiences with the company.
Investigate claims about your potential earnings. Some companies may claim that you will earn a certain income or that existing franchisees or business buyers earn a specific dollar amount. Companies making earnings representations must provide you with the evidence for their claims. Be suspicious of any company that does not show you in writing how it computed its earnings.
Franchisors also must tell you in writing the number and percentage of owners who have done as well as they claim you will. Keep in mind that sales claims about successful areas of business "Be a part of our $4 billion industry," for example — may have no bearing on your likelihood of success. Also, recognize that once you buy the business, you may be competing with franchise owners or independent business people with more experience.
Shop around. and compare business opportunities. Some companies may offer benefits not available from the first company you considered. The CFA publishes an annual directory that describes companies that offer franchises. Contact those that interest you. Request their disclosure documents and compare their offerings.
Listen carefully to the sales presentation. " prices will go up tomorrow," or "another buyer wants this deal," these sales tactics should signal caution. A franchisor with a good offer doesn't use high-pressure tactics. Under certain disclosure requirements you may be required to wait a certain amount of days before signing any binding agreements or paying any money. Be wary if the salesperson makes it sound easy. The thought of "easy money" may be appealing, but success generally requires hard work.
Get the franchisors promises in writing. Any oral promises you get from a salesperson should be written into the contract you sign. If the contract is ambiguous or says something different, it's the contract that counts.
Seek professional advice. Ask a lawyer, accountant, or business advisor to read the disclosure documents and proposed franchise agreement before you sign. The money and time you spend on research and professional assistance; is money well spent.