Franchise Ownership franchise franchisee franchisor a legal agreement that gives an individual the right to market a company’s products or services in a particular area franchisee the person who purchases a franchise franchisor the company that offers the franchise for purchase Chapter 7

Franchising opportunities can be found in a variety of resources including: The Franchise Opportunities Handbook Buying a Franchise: A Consumer Guide the Internet library books The Wall Street Journal Forbes, Barron’s, Entrepreneur, and Inc. Chapter 1

Operating Costs of a Franchise initial franchise fee the amount the local franchise owner pays in return for the right to run the franchise startup costs the costs associated with beginning a business Chapter 1

royalty fees advertising fees weekly or monthly payments made by the local owner to the franchise company advertising fees paid to the franchise company to support television, magazine, or other advertising of the franchise as a whole Chapter 7

Investigate the Franchise Opportunity Franchise Disclosure Document (FDD) a regulatory document describing a franchise opportunity that prospective franchisees must receive before they sign a contract must be provided to franchisee at least 14 days before a contract is signed Chapter 7

Information contained in the FDD includes: background and experience of the business’s key executives costs of starting and maintaining the business terms of the franchise agreement acceptable reasons for contract termination the responsibilities you and the seller will have once you have invested in the opportunity Chapter 7

Evaluate a Franchise Study the disclosure document and proposed contract carefully. All costs and royalty fees should be provided. Interview current owners. shills business references who are paid to give favorable reports Chapter 7

Investigate the franchisor’s history and profitability. Investigate claims about your potential earnings. Does projected local demand match potential earnings? Have the seller provide, in writing, the number and percentage of owners who have done as well as they claim you will. Chapter 7

Listen carefully to sales presentations. Do not sign up immediately. Do not fall for a promise of easy money. Shop around. Compare to other business opportunities. Chapter 7

Get the seller’s promises in writing. Determine what will happen if you want to cancel the franchise agreement. Remember that it is okay to ask for advice from professionals. Chapter 7

Advantages of Owning a Franchise An entrepreneur is provided with an established product or service. Franchisors offer management, technical, and other assistance. Equipment and supplies can be less expensive. A guarantee of consistency attracts customers. Chapter 7

Disadvantages of Owning a Franchise Franchise fees can be costly and cut down on profits. Owners of franchises have less freedom to make decisions than other entrepreneurs. Chapter 7

Franchisees are dependent on the performance of other franchises in the chain. The franchisor can terminate the franchise agreement. Chapter 7