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Disclaimer
A Consumer Guide to Buying a Franchise
- Get Substantiation for Any Earnings Representations
- Some franchisors may tell you how much you can earn if you invest in
their franchise system or how current franchisees in their system are
performing. Be careful. The FTC requires that franchisors who make such
claims provide you with written substantiation. This is explained in
more detail in the section "Investigating Franchise Offers."
Make sure you ask for and obtain written substantiation for any income
projections, or income or profit claims. If the franchisor does not have
the required substantiation, or refuses to provide it to you, consider
its claims to be suspect.
- Take Notes
- It may be difficult to remember each franchise exhibit. Bring a pad
and pen to take notes. Get promotional literature that you can review.
Take the exhibitors' business cards so you can contact them later with
any additional questions.
- Avoid High Pressure Sales Tactics
- You may be told that the franchisor's offering is limited, that there
is only one territory left, or that this is a one-time reduced franchise
sales price. Do not feel pressured to make any commitment. Legitimate
franchisors expect you to comparison shop and to investigate their
offering. A good deal today should be available tomorrow.
- Study the Franchisor's Offering
- Do not sign any contract or make any payment until you have the opportunity to investigate the franchisor's offering thoroughly. As will be explained further in the next section, the FTC's Franchise Rule requires the franchisor to provide you with a disclosure document containing important information about the franchise system. Study the disclosure document. Take time to speak with current and former franchisees about their experiences. Because investing in a franchise can entail a significant investment, you should have an attorney review the disclosure document and franchise contract and have an accountant review the company's financial disclosures.
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_________________________________ Table of Contents The Benefits and
Responsibilities Before Selecting
a Your Ability to Training
and Support Services Investigating
Franchise Terminations
Training Current and
Former
Source: Federal Trade Commission
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