Considerations when Investigating Franchise Opportunities

Investing in a franchise can be a great way to build a successful business. Of course, it is necessary to research opportunities carefully.

2013-04-12

April 12, 2013 (Press-News.org) Considerations when Investigating Franchise Opportunities

Article provided by Usher Law Firm, P.A.
Visit us at http://www.usherlawfirm.com/

Investing in a franchise can be a great way to build a successful business. Of course, it is necessary to research opportunities carefully. In addition to industry growth, unit growth, and the level of support provided by the franchisor, it is also important to find out as much as possible about earnings and financial statements. But where can investors find this sort of information?

FTC Governs the Franchise Sector

The franchise industry has nominal oversight provided by the Federal Trade Commission (FTC). The FTC's Franchise Rule requires franchisors to provide, pre-sale, potential investors with Franchise Disclosure Documents (FDDs), The FDD is provided in a mandated, structured manner consisting of 23 topics. Included is such information as the following:
-Contact information for existing franchisees
-An audited financial statement
-Executive profile information
-Information about business start-up and operating costs
-An outline of franchisor and franchisee responsibilities

The franchisor must provide a potential purchaser with this document at least 14 days before purchase It is important to understand the FTC does not review and/or endorse franchise documents; they merely mandate a template type of disclosure.

Put the Detailed Disclosure Document to Good Use

Of course, it is important to understand how to use the information provided in the Detailed Disclosure Document. Skilled investigation and an objective analysis are critical to making sure that a particular franchise is a good business opportunity.

As with many things, it's not just what is said that is important....it's the things not stated. Remember, franchise documents are carefully crafted legal documents prepared by the franchisor to not just meet compliance requirements, but to advance their long term interests (not yours).

It is important to evaluate potential franchise opportunities from all angles and to know as much about the business as possible before deciding whether to invest. The prudent investor will want to clearly understand the franchise contract terms and the legal obligations they are about to undertake.

It is a mistake for a prospective franchisee to think they are "safe" because the FTC requires certain information be furnished. Such a belief is simply naive. Franchising remains a "buyer beware" undertaking.

Contact an Experienced Franchise Law Attorney

If you are considering investing in a franchise opportunity, contact an experienced franchise law attorney. A knowledgeable lawyer can advise you of your rights and help you determine whether a franchise is right for you.

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