Maria Anton (www.growbizmedia.com*) is an expert in this area. She has outlined 10 Signs of a Great Franchise Opportunity* that include the following vital key indicators that will help you know when you’ve found the right franchise:
1. Industry growth
2. Unit growth
3. Strong support from the franchisor
4. Good management
5. Marketing and advertising support
6. Satisfied franchisees
7. Adequate earnings
8. Sound financial statements
10. A good fit
To determine how your chosen franchise stacks up against this list you’ll need to do some detective work.
The franchise sector is regulated by the Federal Trade Commission (FTC) and, in light of this, the government provides some useful resources and advice designed to help prospective franchisees evaluate and buy a franchise, while avoiding common scams.
Below is a summary of what the law requires to help you assess a franchise opportunity, as well as steps you can take yourself to assess a franchise opportunity:
Detailed Disclosure Document – It’s the Law!
As a general rule, the government requires that franchise owners (the franchiser) provide you with specific information so that you can make an informed decision – this is known as the Federal Trade Commission’s Franchise and Business Opportunity Rule.
Key to this rule is the responsibility of franchisers to provide potential franchisees with a ‘Detailed Disclosure Document’ during the pre-sale stage. This is an essential piece of information that can provide valuable insight into your chosen franchise.
The detailed disclosure is required to contain the following:
The document must be provided at least 10 business days before you pay any money or legally commit yourself to a purchase. If you have any doubts about whether a franchise owner is being less than forthcoming in sharing this information, the FTC provides a hotline for you to call: 1-877-FTC-HELP (877-382-4357).
Do Your Own Investigative Work to Assess a Franchise Opportunity
The law can help keep a franchiser honest, but there are some steps you can take on your own to assess a particular franchise opportunity.
Get more information about evaluating franchise opportunities as well as your legal rights at Business.gov’s Franchise and Business Opportunities Guide, which will also tell you exactly what rules apply to the company selling you the franchise. The more you know about their requirements, the better informed you are when evaluating their opportunities.
About the Author
Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley