Franchising

To become a franchise owner is still risky even though the Federal Trade Commission's new Franchise Rule requires franchise owners to give you more information.

But the FTC's ruling still doesn't give you the data you need the most - documented financial projections, according to a report in Fortune Magazine, "New franchise rule; More disclosure, same high risks."

This article explains some of the risks of franchise ownership, along with steps you can take to decide if you can overcome them in order enjoy franchise revenue from the deal you're considering.

What follows are items the new FTC rule still does not require franchisors to tell you about -

• Earning claims: projections of what your franchise will make.
• The franchisee's right to sue the franchisor for a violation of the FTC rule, "private right to action."
• Lawsuits against them
• Contact information for former franchise owners who have closed shop during the past year.
• The pitfalls of buying territories that are not exclusive.

You need this pertinent information in order to answer the question, "Is buying a franchise risky?"

So before you invest your life savings, mortgage your house, and withdraw your 401k to become the owner of a franchise, prepare a franchise owners list of questions you need to ask the franchisor. Some questions to ask --

1. 1Have you reviewed the franchise contract with your lawyer for approval?
2. Is the franchisor giving you an exclusive territory for the length of your contract?
3. How long has the franchise been in operation?
4. Will the franchiser offer you a training program, advertising support, credit, sine age, and point of purchase material?
5. Will the franchisor give you names of a dozen of its franchise owners?
6. Have you talked with those owners to ask about -

• Franchise owner income
• How the franchisee likes her business
• Is the franchisee getting the promised support from the Company
• What are some of the problems associated with owning this franchise

• Satisfaction of franchise ownership

While the additional disclosure by the FTC is good news for prospective franchise owners, you and your lawyer still need to dig deeper for more information before deciding to invest from around $50,000 up to over $1.5 million to become a franchise owner.

You can uncover lots of information about the franchise you're considering, through the American Association of Franchisees & Dealers (AAFD).

There's a long list of franchises you can choose from. Some are good. Others are rip-offs. And when you investigate carefully to get answers you need to make an intelligent decision, you could become the owner of a lucrative franchise. That's how to make money franchising.

Let's go back to the question, "Should I buy a franchise?" It is a risky business. But aren't there some risks associated with making any investment? The good news about investing in a franchise is that around 80 percent of them succeed.