What You Need To Know About Buying A Franchise - Series 1
Before you begin to investigate the possibilities of purchasing a franchise it might be important to you to know that you have rights. The Federal Trade Commission strictly prohibits franchisors from doing certain things that may put pressure on you to make an immediate decision. Franchise regulations require a franchisor to provide you with full disclosure of their business opportunity in the form of an offering circular referred to as a Uniform Franchise Offering Circular. This document must comply with regulations governing the offering of a franchise. In addition, the franchisor is required to allow you 10 business days to review the document before they can require any payment of fees or signing of a franchise agreement. Any franchisor that violates these requirements can be subject to penalties, fines or prosecution. Also, you might reside in a State where there are laws that the franchisor must comply with.
The Success of Franchising
The success of franchising is unquestionably tremendous. This is due to a number of reasons. The major reason is franchisors are very selective in who they award a franchise too. Most franchisors have a profile of who the franchise candidate will be and if you fit the profile your chances of qualifying increases tremendously. No other business mood has the success of franchising. According to the U. S. Department of Commerce, the failure rate of franchising is less than 4%.
Two Types of Franchisors
The two types of franchisors are simply mature and infant. A mature franchisor has years of experience in franchising and their network is proven, tested, tried and have franchisees who will testify to the value of the franchise business. While an infant franchisor is someone who is just getting started in their franchise venture and may not have all of the tools and techniques in supporting a franchise network in place yet. This is not to say an infant franchisor is not a good purchase. Keep in mind that all franchisors started as an infant franchisor. There are many advantages in purchasing from an infant franchisor.
Two Types of Franchises
The two types of franchises are simply investment and job franchises. An investment franchise is a business that can possibility be an absentee owner that creates equity in the business within a short period of time. An example might be a fast food franchise. These franchises are often more expensive but can be very valuable over a period of time. The job franchise is where the franchisor is offering a business that allows the owner to enter a business that produces daily income. Usually this is a service business.