Facts About Franchises

Susan Solovic with things to consider before buying in.
3:00 | 11/08/12

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Transcript for Facts About Franchises
Your latest in business and finance from ABC news now. -- do open your own business or franchise. Can be easier way to get one off the ground not all franchises though our tickets to success. So here are some invaluable advice and franchises is he BC's small business contributors -- -- -- -- also the CEO sbtv.com. And a New York Times best selling author. Susan I always feel humbled next to your experience and knowledge of our Dan you're such a platter. Listen I do what I can first up are I want -- know anyone who might know exactly what a franchise is the first of what are they why -- so popular. Well they're popular because the very nature of what a franchise is a franchise Dan basically as a business in a box. So in today's economy when people can't find jobs and they're thinking about starting your own business. You look at a franchise and you say wait a minute I'm buying something -- irony note should work it should minimize your risk and should. So it's basically you've got a blueprint for success year buying the brand your buying their systems and procedures you're buying their learning curve. So if you buy the right franchise it can minimize your risk but as you -- not all of them are created equal. OK well and that's just I want to go through some of the factors you say can help you to make a decision of whether -- franchise is right for you right. Right exactly so the first when Dan as your personality. -- your person like me who is an -- -- -- by heart. A franchise is not going to really work for someone like me. If you like doing things -- all the way -- in your own drummer it would be top because of -- set a franchise is. A business in a box you have to do -- the way the franchise organization says that you can do it. Otherwise you could lose your franchise so it's great for people who don't want to take that risk or maybe don't have any business experience because they do have something to follow. But for people who really are -- daughters they can be problematic. Now the other thing is that a franchise may look great either in other and other town area that I state but you really should do your homework as far as whether -- gonna work where you want to be right. That's right you've got to make sure that it's gonna work and transitioned all geographic areas the nature. Your community is this really going to work I was just in Hawaii a couple weeks ago and they're all sorts of shave ice stand everywhere. Now some of those were franchises and I've seen them in the south as well -- on the West Coast. I don't think that's gonna go over too well in Rochester Mitt Minnesota solid you know because -- have -- short selling cycle. So -- -- some of the things you need to consider. The other thing is -- franchise organization. As required by the FTC that the Federal Trade Commission. -- create what's known as a franchise disclosure document FDD. The dairy complex document it has all the history of the franchise organization the business the financial. Franchisees any lawsuits against them. And you need to go through that. Very carefully and also need to go through with an expert in franchise law. Someone who can really digest what's being said in that document so you have to do your due diligence. What are the of the things you mention is determine your involvement of how much you want to. Sort of change and grow with this franchise right. Right some franchise organizations say you know -- you can -- your franchise you can put somebody in their run it for you and all you have to do show up and make sure everything's okay. Other franchise organizations want -- -- franchisee to actually be in the unit and be an owner operator what's known as an owner operator. If that's not what you have in mind. You don't wanna risk losing your investment in that franchise because you don't want to be there all the time -- work with one client that. Bought an ice cream franchise for example and it clearly said they wanted the owner on the premises. Well they decided they didn't have to listen to it and -- why they lost the franchise. He had despite -- premium popular ones yeah yeah -- -- all the rules -- not and that's that's right of exactly it's like that the business and a -- ourselves only has one if there's been a franchise we're gonna go to find out what is actually available what's out there. A good place to start is with the FTC website which is just FTC dot gov. You can find lots of information about franchises and some of the things that you need to think about. On the other place is the international franchise association which as. Really easy to remember franchise dot org. Once again you can find not only franchises that are available but also great articles and resource says. And you may even be able to find an attorney -- some other professional who can help you think through the process. Good advice sound advice in the bottom line is don't try to open to shaved -- store in Rochester Minnesota. That's right exactly don't think that's going to be again idea -- -- -- -- New York Times best sign off the CEO as BTV dot counts isn't thanks so much have a great day.

This transcript has been automatically generated and may not be 100% accurate.

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