For some women, franchising can be a great way to make your mark in business. For an investment that can be as low as $5,000 according to the International Franchising Association (the average initial franchise investment is $250,000- excluding real estate), buying a “ready made” business can lessen the stress of starting from scatch. The IFA and SimplyHired.com report the following facts about franchising:
- almost 4% of all small businesses in the USA are franchises.
- The franchise industry accounts for approximately 40% of all retail sales in the US A new franchise business opens every 8 minutes of every business day.
- Approximately one out of every 12 businesses in the U.S. is a franchise business.
- The average salary for franchiise owner jobs is $128,000
But the Federal Trade Commission (FTC) advises consumers to be aware, there’s more to franchising than meets the eye. Here’s info from thier website you’ll want to heed:
According to the FTC, by law, a franchisor must give you a detailed disclosure document. It is different from the franchise agreement or contract. The disclosure document outlines the general franchise offering, including background information about the franchisor, a summary of the franchise agreement, and a list of current franchisees. The franchise agreement or contract is the written document that spells out the legally binding obligations between you and the franchisor.
The disclosure document should include:
•the total number of franchises, and the number of franchises that were terminated or not renewed during the past year;
•evidence for any claims about potential earnings or the earnings of existing franchisees; •the cost of starting and maintaining the business;
•the names, addresses and telephone numbers of at least 10 franchisees who live closest to you;
•the background and experience of the franchisor’s key executives;
•a fully audited financial statement of the franchisor;
•any lawsuits against the franchisor or its directors by franchisees; and •the responsibilities you and the franchisor have to each other once you’ve purchased the franchise.
You should receive the disclosure document at least 10 business days before you pay any money or legally commit yourself to buying a franchise.
Buying a franchise is a big decision. Before you spend your money, the FTC recommends:
•Read the company’s disclosure document. Review it carefully to learn more about your obligations, the litigation history of the franchisor and failure rates.
•Talk to other franchisees. Don’t rely only on the information the franchisor gives you.
•Contact your state franchise administrator. You also may contact your state Attorney General (www.naag.org) or Better Business Bureau for more information.
•Get all promises in writing. If a salesperson tells you that the franchisor will give you accounts near your home, but the written agreement defines the geographic area more broadly, it’s what’s in the written agreement that counts.
•Review the franchise agreement carefully. It’s important to understand all the conditions of the agreement. It controls your relationship with the franchisor.
•Understand your obligations. As a franchisee, you may have to pay royalties and other fees.
•Investigate claims about potential earnings. The estimated value of the package of accounts you buy may not reflect the income you’ll earn from servicing the accounts. Find out how the company assigns a value to the accounts. Ask how many franchisees made the represented income and where those franchisees are located.
•Be cautious when financing. While financing your purchase through the franchisor may seem appealing, the terms of the financing agreement may not be the best deal for you.
•Consider getting professional advice. The money and time you spend on professional help may save you from a bad investment.
The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP ( 1-877-382-4357 ); TTY: 1-866-653-4261 . The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
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