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A Consumer Guide to Buying a Franchise
- Controls
- To ensure uniformity, franchisors typically control how franchisees
conduct business. These controls may significantly restrict your ability
to exercise your own business judgment. The following are typical
examples of such controls.
- site approval. Many franchisors pre-approve sites for
outlets. This may increase the likelihood that your outlet will
attract customers. The franchisor, however, may not approve the site
you want.
- design or appearance standards. Franchisors may impose
design or appearance standards to ensure customers receive the same
quality of goods and services in each outlet. Some franchisors
require periodic renovations or seasonal design changes. Complying
with these standards may increase your costs.
- restrictions on goods and services offered for sale.
Franchisors may restrict the goods and services offered for sale.
For example, as a restaurant franchise owner, you may not be able to
add to your menu popular items or delete items that are unpopular.
Similarly, as an automobile transmission repair franchise owner, you
might not be able to perform other types of automotive work, such as
brake or electrical system repairs.
- restrictions on method of operation. Franchisors may
require you to operate in a particular manner. The franchisor might
require you to operate during certain hours, use only pre-approved
signs, employee uniforms, and advertisements, or abide by certain
accounting or bookkeeping procedures. These restrictions may impede
you from operating your outlet as you deem best. The franchisor also
may require you to purchase supplies only from an approved supplier,
even if you can buy similar goods elsewhere at a lower cost.
- restrictions of sales area. Franchisors may limit your
business to a specific territory. While these territorial
restrictions may ensure that other franchisees will not compete with
you for the same customers, they could impede your ability to open
additional outlets or move to a more profitable location.
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