Buying a franchise – Franchise Investment appraisal and background information of the franchise – an expert's advice free and Attorney Franchise

Millions of people dream of owning their own business. Having the independence that being your own boss brings, security that nobody can fire you, enjoying a good income – and most successful – the accumulation of wealth and prosperity. Unfortunately, the cards are stacked against a new small business making it big – or making it at all. A constant stream of problems makes competition from large sophisticated chains too intense. Many new start-ups end as failures.

target = "_blank"> Buying a franchise represents a different approach to starting a business. For an initial franchise fee, more royalty payments under the parent company teaches its business model and methods of the franchise operator who assumes all responsibilities operating and financial output. Some statistics are impressive: it is said more than 40% of all U.S. retail sales are institutions franchisees. While franchise giants like McDonald's, KFC, H & R Block and Radio Shack are familiar, household names, franchises are available in a wide range of industries. The list of companies in 3000 and the sale of franchises span over 100 types of industry.

American Dream … or nightmare?
But just as the franchise is a chance to become rich, he is also a chance of being bitten. An alarming number of operators Franchisees earn less than minimum wage, working seven days, sixty to eighty hours a week, pursuing an American costly and difficult to achieve Dream turning into a nightmare. Because the payment of franchise fees just right over the top, as a percentage of gross sales or a fixed minimum the company receives a franchise guaranteed source of income, even if its franchised units operate unnecessarily and are sold several times to new unsuspecting buyers. The Internet is filled with comments from many people who lost $ 250,000 or more on concepts such as eBay Drop Store (ISold It), 30 minutes of fitness concepts (Curves), The UPS Store, etc. Yet many of these companies continue to sell and resell franchises again and again. How can they do this? Because there are enough people who think they can "believe" the way of success, even with a concept or a business that does not work in the market. As we shall see, in many cases the investment decisions are incredibly franchise based on emotion, not on the business logic or even common sense.

Possession And be your own boss?
Pride of ownership and being your own boss is highly touted phrases in franchise recruitment ads. But it is more imaginative than reality. Although you get all the financial risks, headaches and stress of business ownership, what you really own? An owner the franchise is simply a brand license (or service mark) from a company that dictates every detail of business operations. So the real boss is not you, but the company who sells franchise rights. . . and the sea of franchise obligations.

Equity Building?
But at least you're building up equity, the property value of the company as a going concern beyond your investment money to compensate for all those years of hard work and long hours – right? Wrong – at least in the world of franchising. Franchise Company reserves the rights to acquire all of your activities below wholesale prices if their contract is not respected. The acquisition includes rights predetermined asset-based assessments, like the book or liquidation value. These valuation methods provide a minimal nue (The value used for certain files, office furniture, equipment, etc.) and are not generally used to determine the selling price of any company.

Absolutely no compensation is paid for the goodwill established, the value of a company that generates $ X in profit flows cash every month, after years of effort, investment and spending – which eliminates most of property assets valuable. Of course, you may be able to sell your franchise to a third party for a sale price that includes an assessment based on earnings. But this is only possible if:
(A) you can find a buyer who is willing to live in the complexity of a franchise relationship, and
(B) you have a franchise that has achieved a health benefit.

What follows is a list of free online content and advice compiled by the lawyer Franchise and franchise expert, Mr. Franchise, based on review of over 500 franchise offering circulars and twenty-eight plus years of experience in the franchise industry – including ownership of a very successful franchise. These factors to be considered for a franchise investment will help to remove 95% of the companies you are considering. Then you can focus your efforts on the 5% "cream" culture "of companies that merit examination. This franchise list assumes that you are suitable for and willing to live within the boundaries of a franchise relationship. It also assumes free society:

(1) itself has operated successfully franchised the concept for at least five years at various locations;
(2) is not plagued by disputes and lawsuits franchise franchise disgruntled franchise owners;
(3) does not abnormally high attrition franchise (owners who have "left the system"), and
(4) has a balanced development, equitable franchise.

SOLD It – An American Dream turns to nightmare
An example of a franchise company in difficulties that have failed to meet basic threshold standards is iSold It, an eBay Drop Store Franchise. The company started its one and single shop owned by the company in November 2003. A few weeks later, December 10, 2003, they filed an application to sell franchises. The California Department of Corporations did not say "What do you think? You have only been in business a few weeks, how can we consider the sale of franchises? "They do not need that is presented as a risk factor on the front page of the circular offering free, as it should. Disclosure responsibilities assumed by the company (and its lawyers), which became one of the many issues free future.

Instead, the Department simply collected its filing fee of $ 675 and issued an order declaring the franchise registration effective the next day – December 11, 2003. Then the magic of franchise marketing took over. In 2006, the company had nearly 200 franchised drop off stores in operation and has been hailed by contractors Magazine as # 1 in their list of "Top new franchises for 2007" and # 17 on their "Hotter Than Hot List franchise. Contractor Magazine, which requires franchise companies to submit their FOC (franchise offering circular) for supposed review each year before they are listed, did not take into account the high attrition rate (franchise owners leaving the system) or the fact that the audited financial statements their FOC showed the company had not operated profitably since 2004, and gave serious negative iSold It on the announcement # 1 Top new franchises of 2007. How did all this happen? This is yet another bizarre reality in the world of franchising.

verification Franchise company financial statements for the fiscal year ended 12-31-05 showed an operating loss of $ 1.1 million. Nine months later, in September 2006, the net operating loss increased to over $ 4 million.

In its November 3, 2006 Franchise Offering Circular, the table item 20 revealed a total of 10 franchise owners leaving the system, but a number of the hand of Exhibit D-3 "Former Franchisees" revealed a significantly different – 44. A similar "discrepancy" exists about franchise transfers. Item 20 12 Transfer said then that part D-3 discloses 27.

In a long overdue letter distributed to franchise owners, April 5, 2007, CEO Ken Sully painted a disturbing to an American dream that turned into a nightmare. Mr. Sully's letter admitted the company has not been profitable since 2004 (according audited financial statements, the company showed its sole operating income of $ 356,286 in 2004, before the downward spiral precipitated the 2005 and 2006). Over 60 franchised stores have closed and many others are struggling for their survival. Mr. Sully observed "Unfortunately, many people who believed passionately in the potential for the category have lost major investments, including homes and retirement savings. "

Lost their homes and retirement savings? How could such a travesty happen? I advised a number of people considering an iSold It franchise, and warned against all investments. Fortunately, they followed my advice. The concept has never been proven on the market before franchise efforts began, violating the most basic Franchise 101 precept. I also felt the management team did not powers strong franchise and training program five days has been very inadequate. Finally, the operating company growing franchise has been in the red and had a high rate of attrition (owners leaving the system). It did not take much brain power to see it was an accident waiting to happen. I predicted the bubble would burst and, unfortunately, it does.

Common sense could have prevented and so many people lose so much. Unfortunately franchises people call emotions (passions and potential, in the words of M. Sully) and we strive keep common sense and business logic of the purchase equation. If a franchise company is able to obtain a ranking on a list of media, the sale is even easier. Reprints positioning on lists, such as Entrepreneur Magazine, are included in the package given to franchise buyers, who are lulled into a false sense of security and start falling over each other in a race to register before someone else takes their territory desired (another favorite closing technique used to sell franchises).

iSold It It! changed its convenience to the end of May 2007, to add some language delay time risk factor for the cover page of its circular free offering. Hmmmm … Perhaps they read my comments above and did a little research. The new flag of convenience cover page risk factor language says about their franchise system is still new and not proven. "It's very interesting. How can one say about a franchise system, which is approaching its fourth anniversary, is" still New "Maybe they look at things from a perspective" What is the age of our universe? The word "unsubstantiated" is a Another pun. The system is certainly proved in the sense that many people, to quote Mr. Sully, "have lost significant investments, including homes and retirement savings. "So why not use this quote directly in their franchise offering circular? Answer: Can not sell franchises in this way.

In an August 31, 2007 Business Week article, CEO Sully claimed it was not necessary to disclose these risk factors in the FOC. His reasoning: "We told everyone that it's a bit like nature, Wild West" he said. "This is a brand new concept and nobody knew exactly where he went." disclosure has been recently added to the UFOC, he said, " because the number of stores that are not understanding the complexity of the business. "Hello?" You do not tell your franchise investors after the fact that you are required to disclose in the FOC, before they bought so they can make an informed investment decision. This is the purpose of disclosure laws in franchising. And claiming written disclosure of risk factors in the FOC is not necessary if a buyer means a potential seller verbal Wild, Wild West history does not include franchise disclosure responsibilities and is really an admission the company failed in this regard. With its amended FOC, the company continues incredibly march forward with franchise marketing efforts.

Now We will review the list of franchise and factors to consider before any "leap into franchising.

INDUSTRY TREND
Franchise is a leading industry is doing well now and is expected to do so in the future, despite an economic slowdown? Education and renovation services are stable categories. The food is too saturated in general and, except in exceptional circumstances, is not worth the investment high, long hours, headaches and marginal revenue.

TOTAL INITIAL FRANCHISE INVESTMENT
Generally, do not expect a franchise requires an investment of five figure initial franchise to produce a six figure income. As with most things in life, you get what you pay for. On the other hand, do not assume a six-figure investment will lead to a level six figure income. Be realistic prudent. The total initial franchise investment range (including working capital) $ 125.00 or less, and the maximum investment under $ 200,000? You can find solid companies in this range of investment if you're willing to look around.

Do not forget to consider long term financial commitments, particularly rental properties (see below under "LEASING AND LOCATION). In addition, the Budget Working capital (called "supplementary funds" in Article 7 of the franchise offering circular of the company) does not cover operations until the equilibrium point. It covers only a short initial phase (usually three months) of operating costs and breakeven (Where revenues cover operating costs) can not occur for two years or more, knowing that What will it take to get through the first 90 days is not helpful – in fact, it can put you up for financial suicide. In many cases, the achievement of equilibrium can require reserve funds over the total initial investment. Never forget the name of Point 7 of the franchise offering circular: an "investment original. If you do not have a capital reserve sufficient to reach the critical point of profitability, your investment will all fall water and failure occurs franchise.

A franchise owner in a relatively low franchise investment and low operating cost window cleaning said his biggest surprise was how long it actually took his franchise to be profitable. Enter, he thought it would be 12-15 months. He ended up taking twice that time. Fortunately, he had a reserve fund sufficient to get there, but he refused to say that its franchise real benefits or income level were once at "franchise profitability." If you're just above operating breakeven and make less than minimum wage, this definition is anyone successful?

Real Business
This business is retail a legitimate interest, as opposed to "work outside your home" operation? The vast majority work in your home concepts produce income at best marginal.

FREE Management Expertise
The management team franchisor (the company that sells you the franchise) with senior executives showed past achievements and experience in operating a free society (and not just people who have sold franchises)? If not, it is a Big Red Flag. Many companies between the franchise and do not realize they are in a completely new venture – a wholly appropriate management skills and different abilities to navigate franchise relationships. An infrastructure seasoned franchise management must be in place. If the management team did not franchise strong franchise powers, or does not receive regular qualified advice, you might as well make a trip to Las Vegas with the money you intend investing. Your chances of losing money vs are roughly equal.

Normal working hours and days, sufficient level of income FRANCHISE
Is that the kind of business you can work a normal five-day forty-hour week? Life is too short for the seven day lifestyle of sixty to eighty hours a week, torturer destroys health, family and wallet. Financially, we calculated the true hourly rate for franchise owners who work these workaholic hours and discovered many are much less than the minimum wage. A couple who operated pizza franchise $ 200,000 in a fancy upscale center were shocked to discover they were fifty cents per hour each. A just one income level to recover or justify the investment franchise. Many other operators of fast food franchise are still less or operate at a loss until their funds, retirement savings, homes, etc. are exhausted. Buying a franchise in a non-food sector does not necessarily benefit the image of franchising. In a 2006 article "Mail Boxes Etc. owners struggle UPS cons conversion, a "Mail Boxes, Etc. franchise owner who operated his franchise since 1993 reported profits for a store-type MBE as its 16,000 dollars were a year after the payment of royalties and advertising costs to society of franchising. Which calculates to about $ 8.33 per hour for a workweek of forty hours, roughly the salary of a worker to enter the fast-food restaurant.

Another major data gaps contained in the circular franchise company not tell you how much money the franchises in the network are. Instead of answering the question what is the most important investment decision in a franchise disclosure laws franchise that this "option" for the franchise company to answer or not. If they answer this crucial question, it will be found in Article 19. But do not hold your breath – more than 90% of franchise companies "decide" not to answer this question. This is another bizarre reality in the world of franchising. Although they collect each full month (and in many cases, weekly) financial accounts of profits and loss of their franchise owners, and know exactly how much their franchises are (or lose), more than 90% decide not to share this information before buying one of their franchises. A number of franchise dealers said the people asking this question: "The franchise laws do not allow us to answer that question. "Nothing could be further from the truth.

And just because you are a business leader to make a six figure income now, do not assume this income level will be duplicated in a franchise investment just because the company "approves" your application. One such leader, despite a plethora of negative feedback from the current and past, the franchise owners who had lost everything, marched with his investment in a franchise concept of fitness 30 minutes. Despite of its income to 6 figures, it has not invested a penny in the franchise consulting vocational assessment and said it took an act of faith, hoping to build its wings on the way down. Build her wings on the way down? Sound (and is) crazy, but it happens all the time. Because of the schemes Vendor franchise, too many franchise investment decisions are based on emotion. Prior business skills, business acumen (And even common sense) are short-circuited. Needless to say, if the entrepreneur has made an investment decision similar to the employing agency paying the salary to six figures, it would be returned immediately.

Minimum Number of employees
Can you operate the franchise with six employees or less? Managing dozens (or in the case of some fast food operations – hundreds) of adolescents in minimum wage are constantly quitting or simply not reporting for work is a royal pain in the ….. Well, you know what we mean.

LEASING AND LOCATION
For most retail franchises, triple net lease of the site is the largest financial commitment, greater than the investment Total franchise. However, the type tenancy and its ramifications are not required to disclose in a circular offering a free (FOC). For example, an estimate that you'll need 2,000 square feet of rentable space should of $ 5 to $ 10 per foot per month is normally disclosed in Table Franchise Offering Circular the initial investment that leased real estate $ 10,000 to $ 20,000. A note to the investment table may say "assumes 2,000 m² to $ 5 $ 10 a foot. "

But this is only the beginning of a much longer history. The lease is normally one year from May to October, triple-net lease. Thus financial commitment made when signing the lease is at least $ 600,000 (to $ 5/foot for 5 years) $ 2,400,000 (dollars 10/foot for 10 years). And this does not include substantial, additional obligations to pay all taxes of property owners each year, insurance, the common area operating expenses, etc. With hundreds of thousands (or millions) of dollars in financial obligations at stake, personal guarantees and other risks more than just a warm fuzzy feeling that everything will be necessary.

The key questions asked here:

(A) is the franchise you are considering one that can be operated in a commercial area with low rent? Avoid requiring franchises expenditure and costly triple-net leases for a visible display of detail and extravagant rent associated with areas of high foot traffic, such as shopping commercial. You'll sleep much better at night.

(B) What is your total financial commitment under the lease?

(C) Do you have enough cash (or loan guarantee sufficiently liquid third party) to meet the lease, the landlord qualification standards?

If you do not, you might as well forget to invest in the franchise. Even worse, engage in a frank and dubious business model, then the realization that you have made a big mistake – and discovering that you're on the hook personally for a duty of $ 500,000 + location.

An alternative real estate related is to ensure a real lease of sufficient length (with renewal options) to recoup your investment and make a profit. In July 2005, a lawyer in mid-forties bought a franchise of existing ice cream shop for $ 375,000 believing he is a "unique opportunity in a life-." Trading her briefcase for an ice cream scoop, she attended 11 days, the Ice Cream University and operations assumed the bank of ice cream. Proved that this was an opportunity – but only to inherit a store with many problems. These problems include (but are not limited to) a lease which expires next summer and an owner who had already announced the lease is not renewed. Rather than pay over $ 100,000 in relocation expenses, the prosecutor returned to practice law, but he always pays the remaining $ 350,000 loan to buy the franchise once in a lifetime. Although there is a trial current franchise is yet another case of foot "free" – this time attacking a professional no less. Who would ever commit to pay $ 375,000 for an existing franchise retail lease without checking? Sound like another lawyer joke bad, but I can assure you it does not laugh. business fundamentals have been ignored or forgotten in the rush to acquire the opportunity of a lifetime. And I'm willing to bet not one dollar was spent on competent advice free of pre-investment.

IMAGE AND LIFESTYLE
How not turning burgers, scooping ice cream and toilet cleaning fit the image that you want to do in life? Investing in a franchise will be the most important financial decision you ever made and psychological. Many prospective franchise owners do not realize they will be almost every hat at some point, Vendor's collector of bad debts, employees shooting the bathroom janitor. The owner of the franchise usually the first to arrive in the morning – and the last to turn off the lights in the night. And you'll need to forget business benefits such as holiday pay, paid holidays and sick pay. In their place, substitute financial pressures, unexpected events and money drain your savings and retirement. The typical day of work and responsibilities of the franchise you are considering your personal image and desired lifestyle? You discover some of this before investing, working for a few weeks in an outlet on one of the existing franchise owners.

Franchise value TRUE
The purchase of a franchise of a chip "blue" company franchise has spent decades and hundreds of millions in advertising to develop their brand can do a lot of sense. These companies have a "true franchise value" which compensates for the long term disadvantages of being royalty and advertising fund payments. Often these additional payments literally make the difference between operating profit and loss. In unknown franchise chains with little brand recognition or not, you are the franchise buyer construction their brand from scratch, and are struggling with serious, long-term competitive disadvantages.

In these unknown franchise chains, ask yourself a simple question of common sense. What value the company gives you that you could learn about yourself by working with one of their places an employee for a few months? Franchise tell the truth, what most franchise businesses for sale are unknown is just a business opportunity – teach you how to enter a new business. But unlike a business opportunity seller that charges a fee only to help you get started business, they call it a "franchise" and charge ongoing royalty and advertising costs as they are a McDonald's or other company Blue chip franchise.

The reality is that they are not McDonalds type franchise – not even close to one. In the majority of the least known of these franchise chains, you'd be much better from an independent business of your own. You can learn more or all of their so-called "Secrets" of the franchise interview process and talking to (and possibly working a short time for) existing franchise owners.

FRANCHISE PROFITABILITY & "success"
Dr. Timothy Bates study published in 1993 by entrepreneurial growth and Investment Institute Washington, DC (and another study published in 1996) was the first to compare start-up costs, franchise profitability and rates failure franchise for franchisees vs. nonfranchised. In his analysis of some 7270 firms during the trial period, Dr. Bates found that the seed capital for a franchised business averaged $ 85,293 compared to the seed capital for companies averaged $ 30,156 nonfranchised. In 1987 the average nonfranchised reported net income before tax of $ 19,744, compared to a loss of (- $ 1,548) for business franchise. Mr Bates concluded "Despite their higher incomes, capitalization much better, and their supposed advantages of affiliation with a franchisor parent company, the franchisees behind cohort young firms in profitability and survival. "

The franchise companies ignore both studies by Dr. Bates, they claim never happened. Instead, other techniques are used. For example, Some franchise companies use misleading success statistics to sell their franchises. Their promotional materials say franchises generally enjoy a success rate of 90%, compared to less than 20% of independents. These figures are based on unverified information provided thirty years ago by a selection, unrepresentative group of franchise companies. One third of the companies receiving "questionnaires" chose not to participate. There is no verification of any information provided by the franchise companies, not even random audits point. Nor was any effort to identify companies who franchise with franchise owners in their chain, had bankrupt.

Even more recent "studies" said nine out of franchise owners in ten (90%) consider that their right to vote to be somewhat or very successful also suffer from serious methodological flaws. These were simply telephone surveys of owners franchises that were still active and was asked to say (without any definition of "success") if they believe their company was "Very little success," "a little vain," success "or" very successful. "Franchise owners, who had left business or bankruptcy have not been included in the survey.

Even if the terms are defined and a representative sample obtained, franchise owners may be an odd group. Hence the need, as in studies by Dr. Bates, to review data Financial. I remember evaluating an existing franchise for a client. I asked the current owner of the franchise if the company has been successful. He said he was very successful. But his financial statements revealed a different picture. He had never taken a dollar of the company for himself, never made a profit for two years of operation, and has been on the edge of bankruptcy. Another owner of a bakery franchise, interviewed by Business Week, said success in franchising means "adjusting Your definition of success. "He says he realizes a profit, but declined to say what it is, or has never recovered its investment of more than 250,000 initial franchise. Incredibly, he insists he is in the business "for lifestyle reasons, not reasons profit. "Huh? Probably a quote from materials of the company recruitment franchise. In the world of franchising" success "and" profitability " terms are very subjective.

FRANCHISE BROKERS WHO find your perfect match?
T is the franchise you are considering having its own marketing department in-house, or do use outside brokers franchise? The use of franchise brokers is a red flag final. First, it indicates the franchise company is not very serious, which leaves the franchise network, or worse, they are desperate to sell franchises. Secondly, franchise brokers receive a substantial commission up to 50% or more of the Franchise Tax you pay the deductible for the company. Franchise Broker realities: (1) Their service is certainly not "free" in spite of these false statements and similar. It's common sense – how could we offer a "free" service and survive in business? Unfortunately, the common sense of the brain tends to short-circuit when the franchise brainwashing process begins. The simple truth is that if you buy one of their franchises Hawking, your money goes the company to franchise, and in the pocket of the broker. If anyone ever calculated how much time they spend to collect their $ 15,000 or $ 20,000 of the Commission, it is probably much more than a brain surgeon earns. (2) Franchise Brokers definitely not your best interests in mind. They or say what they have in order to close a deal and earn their commission.

Many franchise brokers claim they will help you find a franchise company that is the perfect match for you. At first it sounds good. There are some personality tests and examination your personal finances. At the end of the day, it appears that they represent (and steer you towards) a handful of companies franchise small that you've never heard of before. A detailed analysis often reveals these highly touted franchises produce mediocre or even a Performance below the minimum wage Financial. Yet franchise brokers do not mention this, and individuals continue to rely on their recommendations, believing that the broker who represents them. Nothing could be further from the truth.

In addition, many franchise brokers call themselves franchise consultants. A franchise consultant is usually an independent consultant offering advice to others (usually franchise companies or businesses wishing to franchise their business) for a fee. This makes their advice more impartial in theory as they are not compensated by others. Because they are not legally required to disclose actual or potential conflicts of interest, it is important to ask questions. For example, if you use a franchise consultant who is recommending the franchise "better", they are not paid by companies on their list? This could be a commission, fees or kick consultation. As mentioned, many franchise brokers call themselves consultants "franchise" to hide their true identity. So make sure if you're facing a franchise consultant, he or she is not really just a franchise broker in disguise.

Statutes Disclosure FRANCHISE
The disclosure laws franchise, while requiring franchise companies to give you some limited information, are not close to protect your interests. For example, as noted above, Item 7 of the franchise offering circular requires only an estimate of funds additional 90 days as part of the investment information. But the economic reality is that you should know that the extra funding you'll need to reach breakeven, which may be years away, or your entire "initial" investment to sewers. It seems that this type of information would be required by the franchise disclosure laws, but it is not.

Registration laws FRANCHISE
Never assume that because a company has registered its franchise offering circular in your state, someone the State has approved or reviewed the document in your favor. Franchise registration is obtained by simply forwarding documents and paying a fee deposit – period. In most cases, franchise offering circulars are given an extremely limited review to ensure state-specific warnings are present.

I remember filing an application for registration of a new franchise company in a state that has the reputation of being one of the most difficult "free states" registration law in the country. After the review period three weeks set forth in the Statute had elapsed, and hear nothing, I called the examiner assigned to the request. After looking through his photos, he finally found Offering Circular and the application of my client. He apologized for entirely misplacing the case and promised to immediately review the request and remember. Ten minutes later, he called to say he had finished and was taken to the registration from that date. Ten minutes of review and the franchise company has been given the green light of the state. This is not an isolated case – It happens all the time.

What are the standards Whether a company must meet to sell franchises RELIEF; What are the requirements to franchise a BUSINESS?
Incredibly, the answer is – none. There are no minimum standards or requirements to franchise a business, except the preparation of a franchise offering circular. This is yet another bizarre reality in the world of franchising.

You and me could have no background in any business, form a new corporation or LLC, get it with only $ 1, set up a free Backgrounder and file with any franchise registration state. Although the offer may be subject to impoundment or escrow requirement because of the small-cap ($ 1), we still had the message "social" and be able to sell as many franchisees we want.

In these 14 states, the franchise record, we will not be able to receive the money until each franchise actually opened, but simply a bond would alleviate this difficulty in registering franchise USA. And in the vast most states, there are no laws on the registration of franchise, then we would be able to sell franchises and collect fees with impunity Once we have compiled our franchise offering circular. The FTC Franchise Rule federal government does not protect against this risk either – it only requires disclosure (Ie offer a free Backgrounder) and did not record component or minimum standards for franchise businesses.

investor protection and basic requirements in both federal and state laws for more than 50 years have never been deferred investment franchise. While most non-blue chip franchise could never qualify to sell you a single share of stock in their company, they are entirely free to collect franchise unlimited fees, running royalties, equipment and other purchases, and you do incur financial obligations totaling hundreds of thousands of dollars, even millions, in some cases. This is not information you're likely to find in the laudatory articles on franchising and franchise companies prevalent in the media.

CLOSING
Remember, you are the guardian when it comes to your franchise investment. It's really a place where the phrase "Buyer Beware" applies. So before signing on the line and make what will undoubtedly be the commitment The most serious financial crisis and emotional of your life, get all the facts and figures.

A couple that I recommend after the fact, invested $ 2 million a new franchise company. The contract they signed gave them no right to terminate, regardless of the franchise company or not do. Well Naturally, the contract gave the franchise company unlimited termination capacity, a right he exercised. management team of the company franchise had nobody with experience in running a franchise business. Incredibly, the couple had not spent a dime on legal advice or business before investing two million dollars. The company once friendly franchise had turned into a formidable foe and was ready to resume their right to vote. Unfortunately, this happens too often in the franchise investment. Decisions are taken on a vague and emotional. In an effort to save a few thousand dollars, free houses to investment risk, retirement savings, everything they have. Then they scratch their head in amazement later after inevitable and often horrific problems develop, wondering how they could be so myopic.

Another indispensable level of inquiry is whether you get the franchise value true and if you would rather do business on your own. The overwhelming majority of franchises touted by unknown companies, franchise value is not there and do the same thing independently makes better economic sense and actually decreases the risk of failure.

Finally, and this applies to franchise investments and to invest in any business develop a plan to succeed, but also plan an exit strategy franchise that minimizes the financial risk in case things do not work. Both plans must be carefully considered before the investment is made. Do not wait until problems arise to start thinking about an exit strategy franchise – then it is usually too little, too late.

For more information, visit the Franchise Foundations website.

© 1990-2008, Kevin B. Murphy, BS, MBA, JD – all rights reserved

About the Author

Known in the industry as Mr. Franchise, Mr. Murphy is an internationally-known franchise attorney, franchise expert, author, and instructor. For the past twenty-eight years he has specialized exclusively in the franchise industry and owned a very successful franchise in the home improvement field. He has written over 30 publications, including four books on franchising and one book on trade secrets. Mr. Franchise has drafted, reviewed and negotiated more than 500 franchise offering circulars and instructs franchise company personnel in best franchise practices. He also teaches franchise, licensing and intellectual property courses to attorneys. Mr. Franchise is a franchise attorney and Director of Operations for Franchise Foundations a San Francisco-based professional law corporation.

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