A financing option often overlooked that is...
Here’s what you may not know about franchisors: Federal and
state governments regulate the way they conduct their business, and
so franchisors are extremely careful about their conduct. The
consequences of violating U.S. franchise laws are significant.
The regulations are good for you and everyone else who’s interested in buying a franchise. In fact, since the federal laws were implemented in 1979, the integrity of franchisors has enhanced the reputation of franchising overall. It’s still the safest way to start a business, a fact that’s regularly confirmed by government officials, the media, and perhaps most significantly, by banks and leasing companies. The moneylenders underwrite franchise acquisitions because they feel confident they will succeed, and that makes it possible for you and thousands of others to buy a franchise of your own.
All of that is not to say, however, that franchising is for everyone, and that every franchisor behaves according to plan. While most franchisors follow the laws, a small number do not, and the onus is on you to separate fact from fiction in franchise sales. The onus is also on you to determine if franchising is a right move for you – it’s not for everyone.
With those responsibilities in mind, it’s helpful to know what franchisors won’t tell you. Honest franchisors will not tell you:
- “If you buy this franchise, you will succeed.” Based on your qualifications, including your financial strength, and based on your ability to learn the franchisor’s operating systems, a franchisor may, in fact, know that you will succeed as a franchisee. But an honest franchisor won’t tell you that because too many things can go wrong. By the way, if a franchisor does tell you that, get it in writing!
- “You’re going to become a millionaire with this franchise.” Unless they publish documented proof of what their franchisees earn, honest franchisors will not discuss your financial return. That eliminates the opportunity to lure people into a deal by tempting them with false promises of wealth. You want to know how much you’ll earn after buying a franchise? Ask the existing franchisees! Should a franchisor promise your financial return before you buy a franchise, once again, get that in writing!
- “You’re a perfect fit for franchising.” Honest franchisors won’t say that unless they have proof, and some will. Some franchisors use profiling assessments to match the skills and qualifications of prospective franchisees to the skills and qualifications of top franchisees. These assessments can predict franchise compatibility, but not all franchisors use assessments. Honest franchisors may prefer that you make the decision if franchising is a perfect fit for you. That means you’ve got to do the homework, much of which we discuss in this blog.
Honest franchisors will shy away from saying anything that might be construed to mislead you into buying a franchise. Honest franchisors are usually not desperate to make franchise sales. They are desperate, however, to make the right franchise sales in the right way, which means they will comply with federal and state laws.
Honest franchisors are easy to find. A good place to meet them is at the International Franchise Expo, June 18-20th ,2015, at the Javits Center in New York City. Check out the details at IFEinfo.com.