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Selecting a Franchise


Selecting a franchise is a tough decision, but doing your homework and looking into what the franchise has to offer will help you separate the good ones from the bad.


Research is the key to making an informed decision, so compose a checklist of questions that when answered ensure you are confident the franchisor is reliable and will help you in operating a successful business.


There are a number of areas to examine when considering a franchising opportunity.  The financial stability of a franchise is an important consideration; along with how well it has done so far, its reputation, whether comprehensive training and supporting manual(s) will be provided, and whether it can help you obtain start-up funding.


The Federal Trade Commission (FTC) mandates that franchises are regulated by the FTC, and that a Franchise Disclosure Document (FDD) be provided to a prospective franchisee interested in buying into a franchise opportunity no later than 14 days before an agreement is signed.  


The FDD discloses a number of facts about the franchise and is a great place to begin your research into a franchise.  Items discussed include the history of the franchise, the background of key executives, fees, rules and restrictions, the training provided, territory provisions, financial statements and more.  


Another factor to consider is whether a franchise has joined a franchising association such as the U.S.-based International Franchise Association (IFA). These associations are self-regulated and franchises are accredited based on a range of criteria.


Potential franchisees are also advised to speak with a number of the company's existing franchisees to find out what their experiences have been.  Franchisors must include a list of its current franchisees within its FDD. Speaking with current franchisees will enable you to find out how people who work for the franchise are treated, whether they get enough support, and if their opinions are valued.


However, what current franchisees tell you about their experiences should be taken in context.  Bear in mind that if things are not working out well for some franchisees it could be, at least in part, their fault, so it does not necessarily mean that you will have a similar experience.  Plus, some franchises do not allow its franchisees or representatives to make statements about financials, except in certain instances.


It would be advantageous for you to consult a legal adviser before committing to any contract.  Be sure before you sign on the dotted line that all of your questions have been answered, and your agreement is a balanced document that protects both your rights and those of the franchisor.  In the end, the franchise relationship should benefit both parties so clear communication between you and the franchisor is important from the start.



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