101: Franchises
A franchise may seem like a dream come true. On the surface, may franchises appear to be ready-made businesses offering you a chance to be your own boss. What could go wrong? Plenty, according to the experts. Before you go investing your life savings, it’s important to do your homework when it comes to franchises. We’ve rounded up a collection of advice from the web to get you started.
Read the fine print. All franchisers should make detailed documents called Uniform Franchise Offering Circulars available. These documents include important disclosures that every potential investor should be made aware of, according to an article on WSJ.com.
“In studying the disclosure documents, it’s particularly important to look at the pages showing franchisee turnover,” the article states. “Typically, names and phone numbers of former as well as current franchisees are listed. Contacting some former franchisees and asking why they’re no longer in business often can save the inquirer from a similar outcome.”
Comfort in numbers. Getting in on the ground floor with a new franchise is probably not the best idea, according to the experts at CNNMoney.com.
“To find a franchise that’s credible, experience is key,” writes Jessica Dickler for CNNMoney. Her articles suggests that investors look for a business “with at least 20 franchises already in operation in a variety of locations.”
Be realistic. A franchise can set you up for success, but it’s far from a guarantee, according to the experts at SCORE.org.
“Many people believe that going into a franchise is like joining a partnership where you, the franchisee, will be protected from failure. This is not true,” an article at SCORE.org states. “While franchisee companies have a much higher success rate than individual start-up companies, up to 20 percent of all franchises do not do well.”
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