International Law

: Misleading Advertising Law

Is a Franchise Right for You?

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Kelly Spors, of the Wall Street Journal, has a good insight into some bad decision making - the purchase of a franchise by a naive purchaser.

"It's a common scenario: Someone walks into a chain restaurant, loves the food and ambiance and suddenly thinks, "I should own one of these."

It's tempting to pick a franchise based on personal experiences or love of the product.

But the fact that you're smitten with the business or what it sells doesn't mean it fits your lifestyle, financial situation or long-term goals.

Franchise buyers need to spend ample time exploring their options and doing some thoughtful self-exploration before signing on the dotted line.

The last thing you want is to buy a fast-food restaurant only to realize you don't like 80-hour workweeks, chatting up customers or managing 20 people.

Many people buy franchises "thinking about how much money they can make without thinking about lifestyle issues," says Mark Siebert, president of iFranchise Group, a Homewood, Ill., consultant to franchisers."

What I routinely advise prospects is to work 6 months in the franchise system - the best education in the world. After that period of time, usually working for a minimum wage, you will be in a position to understand the reality behind the franchise contract, franchise disclosure documents and the practices of the franchisor.

How does Spors say we should explore their options?

"There also are so-called franchise brokers, professionals who interview prospective franchisees and then provide them with a list of compatible franchises for free.

They could help a person clarify personality strengths and goals and provide a greater level of detail about the franchise systems and what franchisees are expected to do.

But there are limitations to using a broker.

Many represent only a sliver of all the available franchises, and they get paid a hefty commission from the franchiser when a person buys one of the recommended franchises."

What Spors doesn't point out is that many of the Franchise Disclosure Documents are online at the new website www.openfran.org. Reviewing these documents are essential to making an objective decision about the franchise purchase.