Small Business Builder: Franchises, Part 3

— -- Take a look at what your parent company is required to give you if you join the fold, and it’s easy to see why many new entrepreneurs prefer to buy a franchise instead of starting a business from scratch.

From a marketing plan and an insurance package to a peek at how your brother and sister franchisees are doing, you’ll receive valuable information and advice that is already been tested and refined.

Hire Attorneys, Accountants

In its online “franchise workshops,” the Small Business Administration offers a thorough education on the legal and financial responsibilities of franchising. These can easily overwhelm even longtime business owners, so nearly all franchise experts recommend that you work with experienced attorneys and accountants when you’re ready to buy.

Roger Rule, writing in The Franchise Redbook, says one of the biggest mistakes made by franchisees is “not getting sound legal advice.” Rule recommends that an attorney go over every document in the franchise agreement and goes so far as to suggest that prospective owners tape all conversations (with other participants’ permission) to create a permanent record of oral agreements.

In the United States, franchising is subject to the Federal Trade Commission Rule on Franchising and Business Opportunity Ventures. Once you’ve indicated serious interest in a franchise, the FTC requires the franchiser to give you a copy of the commission’s Uniform Franchise Offering Circular (UFOC). (Check with your state’s corporation commission for additional laws and requirements.)

Check the UFOC Packet

At least 10 days before signing a franchise agreement, or at your first face-to-face meeting with the organization’s representatives, you should receive the UFOC package, which includes:

A copy of the franchise agreement.

A territory map. Be sure to clarify whether you’re contracting for territorial rights to a single franchise or several franchises, or for an entire area. Does your agreement give you the right of first refusal for new areas? What are the limitations on the company's other franchises in your area?