Buying A Franchise

BUYING A FRANCHISE – THE AMERICAN DREAM

© 1990-2010, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved

Buying a franchise represents a different approach to starting a business. Millions of people dream about owning their own business. Having the independence that being your own boss brings, the security that no one can fire you, hopefully enjoying a good income – and for the most successful – the accumulation of wealth and prosperity. Unfortunately, the cards are stacked against a new small business making it big – or making it at all. An endless stream of problems makes competition from large, sophisticated chains just too intense. Most new start-ups end as failures.

THE FRANCHISE INVESTMENT OPTION

Buying a franchise business opportunity may help level the playing field. The U.S. Department of Commerce claims a franchise opportunity is “…the best chance to compete with giant companies that dominate the marketplace.” Some statistics are impressive: it is said over 40% of all U.S. retail sales are through franchised establishments. Giants like McDonalds, KFC, 7-Eleven, H&R Block and Radio Shack are familiar, household franchise names that people think about, and franchises are available in a wide range of industries. The list of 3,000-plus franchise opportunities that span 150 different franchise categories includes such favorites as: automotive, beauty & health, business services, education, fast food, home improvement, hotels & motels, printing, publishing, retail, sports, travel, and more. Franchise categories predicted to do especially well despite the recessionary economy are: child care, education, fitness, health services, resale stores, pets, senior care, spa services, tutoring and green, eco-friendly franchises. If a company has successful business model and proven marketing strategy, buying a franchise can provide a quicker path to profitable ownership compared to starting a business from scratch.

But just as franchising represents a chance to get rich, it’s also a chance to get stung. Everyone knows the big blue-chip franchise names like McDonalds, KFC, Radio Shack, etc. But they’re the exception and not the rule. Many franchise owner wannabes sign on with far smaller, lesser-known or unknown names that may not have a clue about helping operators make money. An alarming number of franchise operators operate at a loss as they deplete savings, retirement accounts, home equity and other assets until it’s all gone. Many others operate just above the break even point, paying operating expenses but earning less than the minimum wage, working 7 days and 70 to 80 hours a week, pursuing an expensive and elusive Franchise Dream that turns into a franchise nightmare of epic proportions.

These cases of franchise failure and franchise problems can and should be prevented with careful franchise due diligence before buying a franchise investment decisions are made. Many times, based on devious ploys of the franchise broker or salesperson, long-term investment decisions are made based on emotion, instead of logic and circumspection. Buoyed by these sales tactics, many first-time franchise buyers question the need for third party, professional review or advice. They mistakenly assume the franchise salesperson is their friend, helping them make the very best franchise choice possible.

GETTING INFORMED

Regrettably too many over-eager, first-time franchise buyers leap into buying a franchise without understanding the in’s and out’s of franchise relationships, the viability of the industry or company they have selected, or the long-term legal consequences of the franchise contract they are signing. If you don’t know what you’re getting in to, or pick a marginal industry, company or concept, you could lose everything (worst case) or it may be many years before you reach the break even point and begin to see any return on your franchise investment. Finally, if you’re lucky enough to reach the break even point, you may discover all you’ve bought is a job, but one earning less than the minimum wage, while working long hours and having lots of financial exposure and headaches. Fortunately, with proper planning, research, investigation and sound franchise advice, these risks can be minimized with the proper franchise due diligence and professional advice. Don’t wait until you’ve signed the contract to begin this process. By then, the window of franchise agreement negotiation has slammed shut and it’s usually too late to do anything.

PROTECT YOURSELF WITH A REALITY CHECK – FRANCHISE ATTORNEY MBA EVALUATION OF FRANCHISE DISCLOSURE DOCUMENTS, PERSONAL FRANCHISE PROFILES AND MORE

Our franchise attorney MBA franchise expert and former franchise owner can evaluate your FDD franchise disclosure document, franchise opportunity and franchise investment. Let his decades of experience in the franchise industry evaluating over 1,000 franchise disclosure documents, including existing franchises for sale and his successful franchise ownership experience begin working for you. Franchise ownership advice is always more meaningful when it comes from a former, successful franchise owner – as opposed to someone who operated an unprofitable one or never operated a franchised business before. Try finding another franchise attorney who has owned a successful franchise.

Our firm offers a comprehensive spectrum of franchise evaluation services so intelligent decisions can be made BEFORE funds are invested and long term franchise contracts and leases are signed. We do not receive commissions from any franchise company or other special interest group. This allows us to represent your interests first, foremost and always. If we feel a particular franchise opportunity is questionable, or that franchising is not appropriate for you, we will tell you this up front and discuss other options. Join the smart franchise buyers who use our franchise evaluation services. These include:

1. PERSONAL FRANCHISE PROFILE (sm)
Before taking any first time franchise plunge, it’s important to do some circumspection. Although franchising and franchise relationships work for some people, they are definitely inappropriate for many others. Before making what will be the most important financial and emotional decision of your life, where virtually all of your assets (home, savings, retirements accounts, investments, etc.) are on the line, take a step back and consult with a franchise expert on whether or not a franchise makes sense for you. This makes a lot more sense compared to expensive franchise attorneys, experts and franchise litigation later on. Our Personal Franchise Profile does just this. It is an invaluable 1-hour phone consultation with our franchise expert to review your background, interests, goals, financial and personal situation, including some focused personality testing. When asked what single event was most helpful in developing the Theory of Relativity, Albert Einstein replied “Figuring out how to think about the problem.” Our assessment gives you the tools to identify and think through the problem of whether or not you are a suitable franchise candidate. The Profile will:

Help you decide if a franchise investment is something you should consider further or forget about entirely. Although franchise relationships work for some, they are definitely inappropriate for certain individuals. Pursuing a franchise if a franchise relationship isn’t in your cards will only spell disaster. This isn’t something you’ll learn from the franchise company. And it’s definitely not something you will learn from franchise brokers. Their “tests” reveal everyone should buy a franchise.

Identify whether you are suitable for any franchise relationship.

After the Profile is taken, the results are sent via email and a follow up call can be scheduled. Call or email to schedule your Personal Franchise Profile appointment. The cost of the Profile is $750.

2. FDD EVALUATOR (sm).
If you have the franchise company’s FDD Franchise Disclosure Document and want to know if it deserves serious consideration, FDD EVALUATOR (sm) is the perfect choice. Our focus is a review of the disclosures in the FDD and major franchise contract provisions to give you a thumbs up or down on the franchise opportunity, see if it’s something worth pursuing further and indicate major red flags and provisions in the contract you definitely want to negotiate or consider further. The key here is to realize when it comes to franchise agreements, you don’t get what you deserve or even what’s fair – you get what you negotiate. Contractual fairness in franchising isn’t something that just happens to fall in your lap – you have to open your eyes . . . and your mouth to get it.

If you decide to move forward you can either negotiating a franchise with the franchise company – which many of our clients do – or retain us for contract negotiations. It’s entirely up to you. Investing in FDD EVALUATOR (sm) and getting an objective, professional reality check before signing long-term franchise agreements and leases, spending large sums of money up-front, and an even greater amount during the course of a 10-20 year franchise contractual relationship makes good business sense.

For a limited time, the cost of the FDD EVALUATOR is just a fixed price for FDD’s that total 100 pages or less. For FDD’s that have more than 100 pages additional charges apply. For FDD’s containing more than just a single unit franchise agreement or franchise agreement promissory notes, guarantees, other legal agreements, etc. an estimate will be given after the FDD evaluator is completed and an hourly rate will apply. What do other franchise lawyers attorneys charge? They charge a “retainer” (meaning pay the retainer now, plus more later on) of $4,000 to $5,000, applied against franchise lawyer attorney hourly rates of $400 to $600 per hour to review the FDD, etc. Odds are they’re not MBA’s, haven’t reviewed over 1,000 FDD’s or ever operated a franchise before. Maybe that’s why they charge so much more? Don’t miss the chance to join the ranks of smart franchise buyers who have used this affordable, eye-opening service by a franchise attorney MBA who doesn’t just talk the talk, but has actually walked the walk, as a successful franchise owner.

To get started with FDD Evaluator you only need to call us with your credit card information, then email the FDD Document. We’ll give you Mr. Franchise’s direct email for this. When he’s finished, you’ll receive his report via email. Then, for further clarification you can schedule a time to speak with him by phone (included at no extra charge in our fixed price special) about his findings and report. Turnaround time for FDD Evaluator is currently running about a week and can be expedited (an additional charge for expedited FDD review applies).

For more information about Franchise Disclosure Documents and franchise tips, visit the FDD Evaluator page of this website.

3. FRANCHISE FINDER (sm).
If you would like a list of major franchise companies for a particular category such as Fitness Centers, Coffee Shops, Pet Stores or any of the other 150 different franchise categories, just let us know and we’ll begin our Franchise Finder (sm) service. Since 1985, this service has helped clients throughout the U.S. locate franchise companies. Armed with our list, you can begin contacting all potential companies in your category of interest. Contacting 10 to 20 different companies for free franchise information packages is absolutely the best way to begin the franchise due diligence phase. Pricing varies depending on the categories and parameters of information desired. Call or email for pricing information.

4. FRANCHISE CHECKER (sm).
If you want an in-depth background check and investigation, including interviews with existing and departed franchise owners, and a very detailed look at the Franchise Disclosure Document (FDD) and franchise agreement, then our Franchise Checker (sm) service is for you. It results in a comprehensive report of findings. Within Franchise Checker (sm) franchise companies are rated on the basis of the following factors:

• Franchise Management Depth & Abilities
• Financial Resources
• Franchise Track Record
• Franchise Litigation History
• Franchise Turnover Rate
• Existing & Departed Franchise Owner Satisfaction
• Franchise Agreement Fairness
• Franchise Disclosure Document Accuracy
• Franchise Disclosure Document Methodology
• Other proprietary Franchise Checker (sm) factors based on our franchise attorney MBA franchise expert’s three decades of experience in evaluating over 500 franchise disclosure documents and our franchise attorney expert‘s background in owning and operating a successful franchise. This is also an excellent way to evaluate high investment franchises as well as an existing franchise (franchise resale) that’s for sale by the current owner. We know the accounting and financial factors to evaluate when looking at existing franchise resales.

You’ll also receive a contract summary with a detailed analysis of the proposed franchise agreement indicating areas or provisions you definitely want to consider or negotiate before making a 10-20 year financial and legal commitments. Despite what many companies may say initially, our almost three decades of experience in franchising proves a lot can be negotiated. Our Franchise Checker (sm) Reports often highlight concerns or negotiating areas that are ignored or downplayed by many franchise attorneys and consultants.

Our Franchise Checker (sm) Reports are prepared using the most current data and information available, so you won’t receive a “boilerplate” report prepared for a previous client. Our experience shows a “positive” recommendation for a particular franchise opportunity one year has turned to a “negative” recommendation based on the current situation of the particular franchise company. Call or email if you are interested in this invaluable service. Franchise Checker (sm) is billed hourly at $600 per hour An advance retainer is required to start this service.

Investing in Franchise Checker (sm) before signing long-term franchise agreements, real estate leases, etc., spending large sums of money up-front ($200,000+), and a multiple of this amount during the course of a 10-20 year franchise relationship, simply makes good business sense.

5. FRANCHISE RESEARCH
We can research and publish a report on almost any franchise topic or subject. Call or email for pricing and details.

YOUR NEXT STEP

A franchise investment will be the most important financial and psychological decision you will ever make. Call 1-415-225-3010 today to let our three decades of successful experience in the franchise industry begin working for you, and join the ranks of smart franchise buyers that have used our services. If operators are busy, please call again.

IMPORTANT FRANCHISE ARTICLES TO READ.

For useful franchise information and tips on evaluating a franchise investments, including a franchise buying checklist, read our Franchise Articles II page Buying A Franchise – Evaluating Franchise Investments – Tips From A Franchise Attorney and Franchise Expert. Also read the Article Mr. Franchise Buys His First Franchise to see how the franchise investment tips and advice worked out in a first-time buying a franchise investment start up and resale experience.

For more evaluating a franchise information and tips about the FDD – Franchise Disclosure Documents, go to our FDD – Franchise Disclosure Document page.

For a useful article about evaluating a franchise attorneys and franchise consultants

For information about the McDonalds franchise program and investment, including how to get a copy of the McDonalds FDD Franchise Disclosure Document go to the McDonalds Franchise page of this website.

FEDERAL TRADE COMMISSION FRANCHISE CONSUMER PROTECTION PAGE – FRANCHISE COMPLAINTS You can also visit the Federal Trade Commission’s Franchise Consumer Protection Information Page. It contains interesting information about franchises and business opportunity ventures.

If you’re having a problem with a particular franchise, there’s also a link there for filing an online franchise complaint for investigation by the FTC. But don’t hold your breath if you do file a franchise complaint. With limited resources, the FTC only gets involved if there are enough franchise complaints and the company selling the franchises is big enough to justify an enforcement action. A 1993 government report found the FTC acted on less than 6% of all franchise complaints. The U.S. General Accounting Office reports that franchise complaints to the FTC from franchise owners increased ten-fold from 1997-1999. This dramatic rise is profound considering complaint data was only available through June 30, 1999. Since 1998, according to the FTC’s website listing franchise enforcement actions, only one enforcement action was taken against a franchise company.

Franchise Foundations has a franchise legal help advice hotline for legal issues and problems with franchise relationships. Call 1-415-225-3010

Franchise Foundations® helps entrepreneurs and business professionals evaluating a franchise and buy a franchise from the many business franchise opportunities available in the marketplace. Let our franchise attorney lawyer, MBA franchise expert and former franchise owner help you evaluate your franchise disclosure document (FDD), franchise opportunity and franchise investment.