Franchise Buyers FAQ

What are the benefits to buying a franchise?

Check out the article;

“The Price for Getting it Right is Getting it Wrong First.”

I think it sums it up nicely.  Let me know what you think.

How do the free franchise advice or referral programs work?

Free franchise advice comes from brokers (coaches/consultants) that try to match you with their inventory of “pre-screened” franchise concepts that are willing to pay a hefty commission to them (out of the franchise fee you pay) if you buy the franchise.

These commissions usually start at a minimum of 1/2 the initial franchise fee.  Franchisors build the broker’s commission into the franchise fee that you pay.

The only way brokers earn a commission is if you buy one of the franchises they recommend, sort of like a real estate agent that only shows you their listings to make a higher commission if you buy the house.

Generally, the lower priced and newer franchise opportunities aren’t represented by brokers.  The brokers don’t earn enough commission on those, which is one of the reasons I recommend looking outside the broker networks.

You will usually get much more for your money and pay a lower initial franchise fee when brokers aren’t involved.

Is franchising as complicated as it seems?

No, Franchising isn’t that complicated.

But between articles posted on the internet by those that have never franchised anything, the Franchise Disclosure Document (FDD), different rules for different states, thousands of concepts to choose from and so on, it can sure seem that way.  Albert Einstein said; “If you can't explain it to a six-year-old, you don't understand it yourself.”

None of us are six years old, but if you are working with someone, whether broker, consultant, sales staff or even an attorney that can’t to explain everything to you in simple terms, it is probably time to look for someone else to help you.

Should I use an attorney to help me find the right franchise?

Using an attorney is the right idea, but it should be one of your last steps, not one of the first.  I know a few that can give excellent legal and pretty good business advice, but they are rare.  Most attorneys give lousy business advice, and the honest ones will admit that.  But business, not legal advice is what you need in the beginning.

Franchise Disclosure Documents (FDD) are required to be written in plain English and explain the franchise offering and contracts you will be signing.  It’s best that you read them and weed out the unsuitable concepts before asking for a legal opinion from your attorney.  Try to use a lawyer that specializes in franchising.  You’ll get much better advice, and you won’t be paying for on the job training.

When should I receive the Franchise Disclosure Document (FDD)?

Personally, I think any bonafide prospect should be given the FDD as early in the process as possible.  Bonafide meaning you have spoken to the franchisor or sales staff and completed an initial application, and are financially qualified.

There is no “first personal meeting” disclosure requirement anymore.  Franchisors are free to disclose whenever they like, as long as you get it and the documents you will be signing two-weeks before buying the franchise.  No matter what, be sure to get it before spending any money traveling to Discovery Day, which will also give you and your attorney time to review it.

Bottom line? The sooner you get the FDD, the better.

Should I stick with the big name franchises?

I don’t recommend that. The general rule is if you’ve heard of it, you’ll pay too much for it. Household names may have more national brand awareness, but you’ll pay dearly for it in high initial and ongoing fees.

If you have a large budget and want to be a multi-state, multi-unit operator, some of the bigger names may be your only choice.  If not, I suggest looking at some of the up and coming regional franchises, even startups with only a few, or no, locations.

Some of the benefits:

With smaller franchises, the best territories are still available, you’ll pay less and may get some concessions for being one of the first, such as larger territories, lower fees, and better term and renewal provisions.

Can you help me find and buy the right franchise?

Yes.  I can give you some tips on how to search outside the broker networks for the best up and coming regional franchises, and then help you do a business review of the franchises you are considering.

I charge a flat fee of $1,500 to review up to three franchise opportunities, and then $350 for each additional one.