THE BIZOP NEWS

Image via Wikipedia

Here is why buying a franchise is tricky, far trickier than it should be.

A person calling themselves the Franchise Reporter, thinks that he or she is qualified to give franchise due diligence advice.

"You're in the market for a franchise and after months of reading brochures, watching slick videos, and poring over UFOCs, you've pared down the list of possibilities to two or three

1. Have any of your franchisees bought additional units? If so, how many?

2 . Who are the members of your training and support teams and can I meet them now?

3 . Can I get a ball-park estimate on my break-even and how long it might take me to reach that figure?

4 . Do you provide hands-on training in an existing store and/or my store?

5 . Will you provide me with a complete list of franchisees and their contact information?

6 . What makes your product or service special when compared to competitors?

7 . Will I be required to purchase supplies from you or a designated source - even if I find a better deal?"

So what is wrong with these questions?

Here is the tricky part - if you cannot find the answers in the Franchise Disclosure Document, the FDD, then you cannot legally rely upon information not presented in the FDD.

When you come to sign the franchise agreement, you will be acknowledging that the only information that you relied upon was contained in the FDD and that the only contract or agreement you have is the franchise agreement contained in the FDD.

As it turns out, most of the answers to the above questions would be contained in the FDD, previously known as a UFOC, or Uniform Franchise Offering Circular.

So, the moral is to just read the FDD very carefully.  Nope, it is trickier than that. Nobody has vetted or checked the information in the FDD, and this is explained to prospects on the front page.  The information given to you may be a complete fabrication, it is up to you to go beneath the information in the FDD to determine whether it is true or not.  But none of that information can be relied upon when making a decision to purchase the franchise, tricky little lawyer stuff that could cost you your life savings.