Franchise Lawyer Blog

Buying a Franchise

The IFA Smartbrief that I received today had a great article on buying franchises, written by Demetra Navab Taleghani (also known as HybridMom) on low cost to entry franchises. The focus of her piece is on how women can find entry points into the economy in the form of start-up franchises that do not require a large up front investment; business opportunities that can be accomplished in some instances with a flexible time arrangement.

Ms. Taleghani conducted her search by starting with Google and focusing on the range of start-up costs presented by the franchisor. If you are looking seriously at a franchise opportunity, you will receive a Franchise Disclosure Document (“FDD”). Item 7 of the FDD will contain the franchise’s Estimated Initial Investment, which is a table of start-up costs, presented in a high to low range, with footnotes describing how the figures are calculated. The footnotes should be read very carefully. Ms. Taleghani’s research then took her to several other sites that offer useful information (her article is worth reading because she has a keen eye for which sites offer meaningful information and which don’t).

She makes reference to an intriguing online tool called Franchise Gator, an ingeniously designed site that enables you to create a shopping cart of franchise opportunities, intelligently organized by cost, industry and other variables.

Another valuable source of information to refer to at the start of the inquiry is the Federal Trade Commission’s website which offers Buying a Franchise: A Consumer Guide.

Although we have tried on this blog to avoid blatant self-promotion, we must point out that an initial discussion with a knowledgeable franchise attorney can also save you a great deal of time and effort in terms of steering you in the right direction. This firm’s website has an entire section devoted to franchising and can provide valuable information to a prospective franchisee.

But back to Ms. Taleghani. Among her comments is the following:

“…before you jump in, do your own due diligence. Make sure you carefully research a company’s track record and definitely talk with other franchise owners and get their feedback and testimonials. Also, if possible go and see these people in person.”

Excellent advice. That has been our sense of the best way to evaluate a franchise opportunity. Talk to people who have entered into that particular system. A list of existing franchisees can be obtained from the FDD for any particular system, with contact information, so that prospective purchasers can obtain real and hopefully frank assessments from operators as to how well the system is working.

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