Great Fitness

Buying a Franchise – Evaluating Franchise Investments and Franchise Documents Information – Tips from an expert in Franchise and Franchise Attorney

Millions of people dream about owning their own business. Having the independence that being your own boss brings, the security that nobody can dismiss 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 decisions at all. An endless stream of problems makes competition from sophisticated chains too intense. Much new start-ups end as failures.

Buy a franchise represents a different approach to starting a business. For an initial franchise over royalty payments under the parent teaches his business model and methods for the franchise operator who assumes all the responsibilities of operating and financial decision. Of statistics are impressive: it says more than 40% of all U.S. retail sales are through franchised establishments. 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 the 3000 largest companies to sell franchises range of over 100 different industry categories.

American Dream … or nightmare?
But just as franchising represents a chance to become rich, it's also a chance of being bitten. An alarming number of operators Franchisees earn less than minimum wage, working seven days, from sixty to eighty hours a week, pursuing an expensive and difficult to reach America Dream turns into nightmare. As the payment of franchise fees being immediately comes up, as a percentage of gross sales or a minimum fixed the company gets a guaranteed source of income franchise, even if its franchised units operate and are sold without profit, again and again 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 off stores (iSold It), 30 Minute Fitness concepts (Curves), The UPS Store, etc. Yet many of these companies continue to sell and resell franchises over and over again. How do they accomplish this? Because there are enough people who think they can "believe" the road to success, even with a concept or a business that does not work in the market. As discussed below, in many investment decisions if the franchise is incredibly based on emotionalism, and not on logic or even common sense.

Owner And be your own boss?
Pride of owner and be your own boss is highly touted phrases in ads to recruit franchisees. But these are more fantasy than reality. Although you get all the financial risks, headaches and stress of business ownership, what you really own? A franchise owner is a simple license trademark (or service mark) to a company that dictates every detail of business operations. So, the real boss is not you, but the company that sells you the franchise rights. . . and the sea of franchise obligations.

Equity Build up?
But at least you build a capital value of the property 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. The reserves of the company's franchise rights to acquire all your activities below wholesale prices if their contract is not strictly respected. The rights to acquire assets to provide predetermined based assessments, such as book value or liquidation. These methods of assessment of compensation to an absolute minimum (the value used for some filing cabinets, 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 or cash flow every month, after years of effort, investment and costs – which eliminates most of the property asset value. Of course, you may be able to sell your franchise to third for a sale price that includes stock-based compensation evaluation. 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 deductible showing considerable benefits.

What follows is a checklist of franchise and bottom-line advice compiled by the Attorney and Franchise Expert franchise, Mr. Franchise, based on reviewing more than 500 references Franchise Offerings and twenty-eight plus years of industry experience franchising – including ownership of a very successful franchise. These factors to consider when making a franchise investment will help to eliminate 95% of the companies you are considering. Then you can focus your efforts on the 5% "cream" culture "to companies that deserve to be reviewed May This franchise list assumes that you agree to and willing to live within the boundaries of a franchise relationship. It also requires the company Franchise:

(1) itself has successfully exploited the concept being franchised for at least five years in several locations;
(2) is not plagued by disputes and lawsuits franchise franchise disgruntled franchise owners;
(3) are not exceptionally high deductible attrition rate (the owners who have "left the system"), and
(4) has a compact, balanced equitable relief.

SOLD! – An American Dream that turned into a nightmare
An example of a society struggling franchise that failed to meet basic threshold standards is iSold It, an eBay drop-shop franchise. The company started its one and only company-owned store in of 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've only been in business a few weeks, how can you consider even selling franchises? "They do not need be now be presented as a risk factor on the front page of the offering circular franchise, as it should. Disclosure responsibilities assumed by the company (and lawyers), and it will become one of the many issues franchise future.

Instead this, the Department simply collected its $ 675 filing fee and issued an order declaring the franchise registration effective the next day – the 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 praised by Entrepreneur Magazine as # 1 in their list of "Top New Franchises for 2007" and # 17 on their "Hotter Than Hot" list franchise. Entrepreneur Magazine, which requires franchise companies to submit their FOC's (Franchise offering circulars) for supposed review each year before they are listed, does not consider the high attrition rate (franchise owners leaving the system) or the fact that audited financial statements in their FOC showed the company had not operated profitably since 2004 and negative serious and gave the list iSold It # 1 for Top Franchises of 2007. How did all this happen? This is yet another bizarre reality in the world of franchising.

The Franchise Company's audited financial statements for the year ended 12-31-05 showed an operating loss of 1.1 million dollars. Nine months later, in September 2006, the net operating loss increased to over 4 million dollars.

In its November 3, Franchise Offering Circular 2006, Table item 20 revealed a total of 10 franchise owners leaving the system, but a manual count of Exhibit D-3 "Franchisees Former" revealed a significantly different – 44. A similar "discrepancy" exists about franchise transfers. Article 20 says 12 transfers whereas Exhibit D-3 discloses 27.

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

Have lost their homes and retirement savings? How can such a charade to happen? I advise a number of Persons considering an iSold It franchise and warned all against investment. 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 lacked credibility and solid franchise program five days of training was woefully inadequate. Finally, the company franchising has been increasingly in the red and had a high attrition rate (owners leaving the system). It did not take much power brain to see it was an accident waiting to happen. I predicted the bubble would burst and, unfortunately, it did.

Common sense would have and should prevented many people lose a lot. Unfortunately, those franchises appeal to emotions (passions and potential use of the terms of Mr. Sully) and aim to keep common sense and logic of the buying equation. If a franchise company is able to obtain a ranking on the list media, the sale is even easier. Reprints high rankings 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 begin to fall over each other in a race to register before someone else take their desired territory (another favorite closing technique used to sell franchises).

iSold It! changed its convenience at the end of May 2007 to add some long overdue language of risk factors to the front page of its Franchise Offering Circular. Hmmmm … perhaps they read my comments above and did a little research. The new page FOC cover the language of risk factors called "franchise system is still new and unproven." It's very interesting. How can you say a franchise system, which is approaching its fourth anniversary, is "still new?" Perhaps they are looking at things from a "how old is the view of our universe? The word "unproven" is 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: everything 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 like nature, Wild West," he says. " It is an entirely new concept and nobody knew exactly where he went. "Disclosure has been added to the UFOC recently, he said," because the number of stores that were not understanding of the complexity of the business. "Hello?" You do not tell your investors franchise after the fact, that you were required to disclose in the FOC before buying so they can make an informed investment decisions. It is the purpose of laws franchise disclosure. And claiming written disclosure of risk factors in the FOC is not necessary if a potential buyer the seller hears oral wild history of the Wild West did not take into account the responsibilities of disclosure and openness is really an admission the company failed in this regard. With its modified flag of convenience, the company continues incredibly marching forward with the marketing efforts of the franchise.

Now consider the checklist franchise and factors to consider before any "leap into franchising.

INDUSTRY TREND
The franchise is in a high-tech industry that is doing well now and should do well in the future despite an economic slowdown? Education and Home Improvement Service Categories are stable. The food is too saturated in general, except in circumstances exceptional, not worth the high investment, long hours, headaches and marginal income.

TOTAL INITIAL FRANCHISE INVESTMENT
In general, do not expect a franchise that requires a five-digit investment Franchise initial production of six-figure incomes. As with most things in life you get what you pay for. On the other hand, do not assume six investment Figure lead to a level six figure income. Be realistic and conservative. Is the total initial franchise investment wide (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.

Remember to consider new financial commitments to long term, including the leasing of real property (see discussion below "RENTAL AND LEASING"). In addition, working capital measure (called "additional funds" in Item 7 of the offering circular Franchise Business) does not apply to operations until the break-even. It covers only the initial phase of short duration (usually only three months) of operating expenses The break-even point (where revenues cover all operating costs) May not occur for two years or more, only know What will it take to get through the first 90 days is not helpful – in fact, that you may have configured to financial suicide. In many cases, reaching the threshold of profitability may require more reserve funds than the total investment in initial capital. Never forget the name of item 7 of the Offering Circular franchise: "initial investment". If you do not have a capital reserve sufficient to reach the threshold of profitability, your investment as a whole will go down the drain and the failure occurs franchise.

A franchise owner in a relatively low investment and low operating cost window cleaning franchise said his biggest surprise is how long it actually took his franchise to be profitable. Return, he thought it would be 12 to 15 months. He ended up taking twice that time. Fortunately, he had a reserve fund sufficient for it to do, but declined to say what his actual franchise profits or income level were once at the "franchise profitability." if you are just above the threshold of profitability and to less than the minimum wage is that the definition of individual success?

REAL BUSINESS
Is this company legitimate retail by opposition to work "out of the house" operation? The vast majority of work in your home concepts produce an average at best marginal.

FRANCHISE MANAGEMENT EXPERTISE
Does the management team of the franchisor (the company that sells you the franchise) are executives with demonstrated past achievement and experience in operating a franchise company (not only those who have sold franchises)? If not, it's a big Red Flag. Many companies enter franchising and do not realize they are in an entirely new business – one requiring Fully management skills and different abilities to navigate in the franchise relationship. Infrastructure seasoned franchise management must be up. If the management team lacks strong franchise franchise credentials, or does not receive ongoing advice from qualified people, you can equally well take a trip to Las Vegas with the money you intend to invest. Your chances of losing money are vs. almost equal.

Normal working hours and days; SUFFICIENT FRANCHISE INCOME LEVEL
The nature of the business you can work a normal five days, forty-hour workweek? Life is too short for seven days, from sixty to eighty hours a week, lifestyle executioner work that 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 minimum wage. A couple who operated a franchise of $ 200,000 for pizza in a fancy upscale Mall were shocked to discover they were fifty cents an hour each. Hardly an income level to recover or justify the investment franchise. Much faster franchise operators are even less food, or operate at a loss until their funds for retirement savings houses, etc. are exhausted. Buying a franchise in a non-food industry does not necessarily improve an image nonprofit franchise. In a 2006 "Article Mail Boxes Etc. Owners Fighting UPS Conversion," a Mail Boxes, etc. franchise owner who operated his franchise since 1993, Reported earnings for a typical MBE store like his were $ 16,000 per year after paying royalty and advertising costs to the company franchise. Who calculates out to about $ 8.33 per hour for a forty-hour week of work, about the salary of a worker to capture rapid foods.

Another major shortcoming of the data contained in the Offering Circular franchise does not tell you how much money the franchisees of network are making. Instead of answering that question is the most important investment decision of franchise disclosure laws Franchise make this "option" for the franchise company to answer or not. If they meet this crucial issue, it will be located at number 19. But do not hold your breath – more than 90% of franchise companies "decide" not to answer this question. It's another bizarre reality in the world of franchising. Although they collect each full month (and in many cases, the weekly returns) and loss of financial benefits from their owners franchise, and know exactly how their franchises make (or lose) more than 90% decide not to share this information before buying one of their franchises. A number of franchise dealers have told the person asking the 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 businessman making a 6-figure income now, not not assume that income level will be duplicated in a franchise investment just because the company "approves" your application. A director of such despite a plethora of negative feedback from owners of franchises past and present, who had lost everything, marched forward with its investment in a free 30-minute fitness concept. Despite his 6-digit revenue, it does not invest a penny in the free professional advice assessment and said it took an act of faith, hope to build wings on the way down. Build her wings on the way down? Sound (and is) crazy but it happens all the time. Due to the ploys of the franchise seller, too many franchise investment decisions are based on emotion. Prior skills business, business sense (and common sense) are short-circuited. Needless to say, if the entrepreneur has made a decision similar investment for his corporate employer paying the 6-figure salaries, it would be quickly fired.

Minimum number of employees
Can you operate the franchise with 6 or fewer employees? Managing dozens (or in the case of some fast-food operations – hundreds) of minimum wage teenagers who are permanently or simply quit showing not to work is a royal pain in the ….. Well, you know what we mean.

LEASING AND LOCATION
For most franchises retail, triple net lease of the site is the largest financial commitment, greater than the total franchise investment. However, the typical real estate lease and its ramifications are not required to disclose in any Offering Circular Franchise (FOC). For example, an estimate that you will need to 2000 square feet of space with expected rental of $ 5 to $ 10 per foot per month is normally shown in the table of the initial investment Franchise Offering Circular as rental properties Real $ 10,000 to $ 20,000. A note to the investment table May say "assumes 2,000 sq. ft. to $ 5 to $ 10 a foot."

But this is only the beginning of a much longer history. The lease is normally a 5 year at 10 triple-net lease. Thus, the financial commitment made when signing the lease is at least $ 600,000 (at $ 5/foot for 5 years) of 2,400,000 dollars ($ 10/foot for 10 years). And this does not include substantial, additional obligations to pay all annual property taxes of the owner, insurance, expenses common use area, 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.

Key questions to ask:

(a) is the franchise you are considering one that can be operated in an area with low-cost business enterprise? Avoid franchises requiring expenditure costly and triple-net leases a retail store and seen the extravagant rent associated with areas of high foot traffic, such as shopping commercial. You will sleep much better at night.

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

(c) Do you have enough liquid asset (or loan, the guarantor 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. Or worse yet, get involved in a franchise and business model questionable, realizing that you made a big mistake – and discovering that you're on the hook personally for an obligation of $ 500,000 + lease.

A variant Real estate is about obtaining a lease of sufficient length (with renewal options) to recoup your investment and achieve a profit. In July 2005, a lawyer in his mid-forties has purchased an existing franchise ice cream shop for $ 375,000 believing it a "once-in-a-lifetime chance." Trading her briefcase for an ice cream scoop, she attended the company 11 days Ice Cream University and assumed operations of the ice cream shop. Proved that this was an opportunity – but only inherit a store with many problems. These problems include (but are not limited to) a lease that will expire the following summer and an owner who had previously announced the lease was not renewed. Rather than pay the $ 100,000 plus costs resettlement, the prosecutor returned to the practice of law, but continues to pay off $ 350,000 remaining from the loan to buy the once-in-a-chance franchise to life. Although there is a lawsuit over franchise is yet another case of "franchise fever" – this time the attack a professional or less. Who would ever agree to pay $ 375,000 for a team of existing retail outlet without checking out the lease? Sound like a Another attorney joke, but I can assure you it's not fun. Fundamental company have been ignored or forgotten in the rush in acquiring the opportunity of a lifetime. And I'm willing to bet that not one dollar was spent on competent advice before franchise investment.

IMAGE AND LIFESTYLE
How does flipping burgers, ice cream gathering and cleaning toilets fit the image of what you do in life? Investing in a franchise will be the largest financial and emotional decision of your life. Many prospective franchise owners do not realize they will blame almost all at some point, vendor's bad-debt collector, draw employees bathroom janitor. The franchise owner is usually the first to arrive in the morning – and the last to extinguish lights in the night. And you'll need to forget the business benefits such as paid vacations, paid holidays and sickness. To their place, substitute financial pressures, unexpected events and money draining from your savings accounts and retirement. Does the typical working day and responsibilities of the franchise you are considering fit your personal image and desired lifestyle? You can discover some of this before investing, working for several weeks in an outlet on one of the existing franchise owners.

TRUE VALUE FOR FREE
Buying a franchise with a memory "blue" franchise company 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 mean the difference between earnings and operating at a loss. In unknown franchise chains with little recognition or not mark you, the buyer is free building their brand from scratch, and are struggling with serious disadvantages in the long term competitiveness.

In these unknown channels franchise, you should ask yourself a question, just common sense. What value is the company that gives you that you do not find out for yourself by working to one of their facilities as an employee for two months? Franchise tell the truth, what business franchise is the most unknown sale is simply a business opportunity – teaching you to enter a new business. But unlike a business opportunity seller that imposes pay costs unique to help you in business, it's called a "franchise" and charge ongoing royalty and advertising costs as they are a McDonalds or other Blue chip maker franchise.

The reality is that they are not a franchise like McDonalds – not even close to one. In most of these lesser-known franchise chains, you'd better start an independent business on your own. You can learn most or all of their so-called "Secret" franchise interview process and talking with (and work, possibly a little time to) the owners of existing franchises.

FRANCHISE PROFITABILITY & "SUCCESS"
Dr. Timothy Bates Study 'released in 1993 by the Entrepreneurial Growth and Investment Institute in Washington, DC (and another study published in 1996) was the first to compare start-up costs, franchise profitability and the failure rate of franchise businesses franchise nonfranchised vs. In his analysis of some 7270 companies during the trial period, Dr. Bates found that startup capital for a franchised business averaged $ 85,293, compared with the average start-up capital for companies nonfranchised of $ 30,156. In 1987 the nonfranchised reported average pre-tax net income of $ 19,744, compared to a loss of (- 1.548 $) For franchisees. Dr. Bates concluded "Despite their higher incomes, the much better funded, and their supposed advantages of a affiliation with a franchisor parent company, the franchisees lag behind cohort young firms in profitability and survival rates. "

The concession companies ignore both studies by Dr. Bates, claiming they never arrived. 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 independent businesses. These figures are based on unverified information provided thirty years ago, by selecting, unrepresentative group of franchise companies. One third of the companies receiving "questionnaires" chose not to participate. There was no verification of any information provided by the franchise, not even random checks on site. Nor was any effort to identify companies who franchise with franchise owners in their chain, had disappeared from the market.

Even more recent "studies" saying nine out of ten franchise owners (90%) considered their franchise to be some somewhat or very successful also suffer from serious methodological flaws. These were simply telephone surveys of franchise owners who were still active and asked to say (without any definition of "success") if they believe that their company was "very little success, "" somewhat unsuccessful, "somewhat successful" or "very successful. "Franchise owners who had gone out of business bankrupt or were not included in the survey.

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

FRANCHISE BROKERS WHO FIND YOUR PERFECT MATCH?
Does the franchise you are considering having its own department internal marketing, or should we use brokers franchise outside? The use of franchise brokers is a red flag set. First, it indicates the franchise company is not very serious about who it lets in the franchise network, or even worse, they are desperate sell franchises. Secondly, franchise brokers receive a substantial commission up to 50% or more of the franchise fee you pay franchise business. Franchise Broker realities: (1) Their service is certainly not "free" despite these false statements and similar. It's common sense – how could they offer a "free" service and survive in business? Unfortunately, common sense part of the brain tend to short-circuit when the franchise brainwashing process begins. The simple truth is that if you buy a franchise they are Hawking, your money is going to business franchise, then the broker's pocket. If anyone ever calculated how much time they spend to collect their commission $ 15,000 or 20,000 $, It is probably more of a brain surgeon earns. (2) Franchise brokers who certainly do not have your best interests in mind. They will say or do whatever they have in order to close an agreement and earn their commission.

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

In addition, brokers franchise that many call themselves franchise consultants. A consultant franchise is usually an independent adviser who offers advice to others (usually franchise companies or businesses who want to franchise their business) for a fee. This makes their advice more impartial in theory as they are not compensated by third party. 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 "best franchises," they are paid by companies of anything on their list? This could be a commission, kick-back or consultation fees. As mentioned, brokers franchise that many call themselves "franchise consultants" to hide their true identity. So make sure you are dealing with a franchise consultant, he or she is not really just a franchise broker in disguise.

DISCLOSURE LAWS OF FRANCHISE
The franchise disclosure laws, while requiring franchise companies to give you information certain limited circumstances and does not happen to protect your interests. For example, as discussed above, Item 7 of the franchise offering circular requires that an estimate of additional funds for 90 days as part of the investment information. But the economic reality is that you need to know the additional funds you need to reach break-even point, which may be years away, or your entire "initial" investments go down the drain. It seems that this type of information would be required by the franchise disclosure laws, but it is not.

LAWS FRANCHISE REGISTRATION
Never assume that because a company has registered its franchise offering circular in your state, someone at the State approved or reviewed the document in your favor. Franchise Registration is obtained by simple transmission of documents and paying a filing fee – period. In most cases, the circular provides franchise are given an extremely limited to ensure the state specific warnings are present.

I remember filing a registration application for a new franchise company of a State which has the reputation of being one of the "hardest States registration" franchise law in the country. After three weeks of review set forth in the statute had passed, and not hear anything, I called the examiner assigned to the request. After looking through his photos, he finally found the offer circular and my client application. He apologized for misleading the entire record and promised to consider the request immediately and call me. Ten minutes later he called to say he had completed and was taken to the registration effective that day. Ten minutes of review and the franchise company has received approval from the State. This is not an isolated case – it happens all the time.

What standards IS A FRANCHISE COMPANY MEET TO sell franchises ARE HE CONDITIONS OF FRANCHISE BUSINESS?
Incredibly, the answer is – none. There are no standards or minimum 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 I could not have background in any business, forming a new corporation or LLC, capitalizing with just $ 1, introduced franchise Background and deposit it with all State of registration of franchise. If the offers may be subject to impoundment or escrow requirement because of the small cap ($ 1), we would still be saved "and be able to sell as many franchisees that we want.

In these 14 franchise registration states, we may not be able to receive the money until each franchise actually open, but simply by adding a bond would alleviate this difficulty in the registration of the franchise states. And in the vast majority States, there are no laws on the registration exemption, so that we would be able to sell franchises and collect fees with impunity Once we've compiled our franchise offering circular. The federal FTC Franchise Rule does not protect against this risk either – it only requires disclosure (ie provide a Franchise Disclosure Document) and did not record component or minimum standards for franchise companies.

Investor protection and basic requirements in both federal securities and state for more than 50 years have never been Deferred investment franchise. While most non-blue chip franchise companies could never qualify, even if you sell a single share of stock in their company, they are entirely free to collect unlimited franchise fees, ongoing fees, purchase of equipment and others, and the cause according to your financial commitments totaling hundreds of thousands, even millions, in some cases. This is not information you are likely to find in the laudatory articles on franchising and franchise companies prevalent in the media.

CLOSING REMARKS
Remember, you are the only guardian when it comes to your franchise investment. This is definitely an environment where the expression "Buyer Beware" applies. Thus, before signing on the line and make what will undoubtedly committed the most serious financial and emotional of your life, get All facts and figures.

I recommend a couple afterwards, has invested 2 million dollars in a new franchise company. The contract they have signed gave them no right to terminate, no matter what the franchise company has done or not. Of course, the contract gave the franchise company ceased unlimited capacity, a right he exercised. Management Team Business franchise had no one with experience in managing a business franchise. Incredibly, the couple had not spent a penny on a legal opinion or a company before investing $ 2 million. The company was once friendly franchise was transformed into a formidable enemy and was ready to resume their right to vote. Unfortunately, this happens too often in investment franchise. Decisions are taken on fuzzy feelings and emotionalism. In an effort to save a couple thousand dollars, investors houses risk free, retirement savings, everything they have. Then they scratch their heads 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 you'd better do business on your own. In the overwhelming majority of franchises spied on by unknown companies, the value franchise is not there and did the same thing independently makes more economic sense and actually decreases the risk of failure.

Finally, and this applies to franchise investments and invest in any business, develop a plan for success, but provide also 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 develop to start thinking about an exit strategy free – 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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