Look before you leap
Monday, March 13, 2000
Many franchise opportunities are legitimate. Some aren't. The Federal Trade Commission suggests taking these steps when considering plans to go into this type of businesses:
- Make sure the franchise seller gives you a detailed disclosure document with an audited financial statement, information on the cost of starting and maintaining the business, the background and experience of the business's key executives and the names and contact information of other franchise owners and operators.
- Investigate the opportunity by talking to other franchise owners, asking how the information in the disclosure document matches their experience with the company.
- Beware of broad sales claims. A call to "be part of our $4 billion industry," for example, may have no bearing on your likelihood of success. Once you buy the business, you may be competing with franchise owners or independent business people with more experience.
- Ask a lawyer, accountant or business adviser to read the disclosure document and proposed contract. The money and time you spend on professional assistance and research - such as phone calls to current owners - could save you from a bad investment decision.
For more information, see the Federal Trade Commission's Web site at: www.ftc.gov/.