March 16, 2018
Many people are drawn to the built-in security of the franchise model: There’s a track record, an established brand name, training programs – not to mention ongoing support and marketing assistance.
But startup costs can be high, profits aren’t guaranteed, and your independence – like it or not – is limited, as most franchisors impose strict standards on everything from price to interior design.
You can see if there are consumer complaints against a particular franchisor by doing a search on the Better Business Bureau’s site or by making a request in writing to the FTC. It’s also important to research whether individual franchisees near your potential location have a record of complaints. After all, if a franchisee “Down the street has a bad rating, that will reflect on you” Power says.
One place to look for a franchise consultant or attorney is the IFA’s supplier search page. You can also contact the American Bar Association’s Forum Committee on Franchising for referrals. A franchise consultant, also called a broker or coach, can provide excellent advice, although keep in mind they are often working for the franchisor. You typically don’t pay a fee, as the consultant will get a cut from the franchisor if you sign up. A lawyer will typically charge in the range of $1,500 to $2,500 to review a franchise company’s FDD, Power says. The money may be well-spent if you avoid a mess down the road.
The Internet may sometimes lead you down wormholes, but there are a number of sites for basic franchise information. Power recommends the IFA; World Franchising, a portal that aggregates up-to-date franchising information; and Google Scholar, which helps you search legal documents, such as any lawsuits filed against the company. Others include FranData, which claims to have the largest library of current FDDs, and the American Franchisee Association, a trade group that provides information on common problems that franchisees face.
Credit: Colleen DeBaise