Model Franchise Disclosure Law

[mage lang=”en|sp|en” source=”flickr”]model franchise disclosure law[/mage]

Doing Your Homework: How to Get the Facts on a Small Business Franchise

Public relations play a major role in today’s business world. Each year, businesses spend hundreds of millions of dollars, paying highly skilled men and women who know how to make everything from hamburgers to airlines look as good as possible in the public eye. It’s not that most businesses, products, and services aren’t as outstanding as they present themselves to be, but it can be hard to tell which representations are most accurate. So when a hopeful entrepreneur browses through a list of franchises and finds that many work at home businesses appear too good to be true, he may have a difficult time deciding which one to choose. That is, unless he has resources at his disposal to confirm that these business opportunities are legitimate. And as it turns out, though many potential franchisees don’t realize it, such resources are available; a person just has to know where to look.

The Franchise Disclosure Document

Because it can be so hard to determine a viable home based business from a total scam, all franchisors, by law, are required to have a Franchise Disclosure Document (or FDD) available to any prospective franchisee. It provides a complete overview of everything about the business, its goals, its history, and its practices that anyone could ever possibly want to know. In fact, a quick jaunt over to the Federal Trade Commission’s website shows exactly how precise and complete a disclosure the government expects from all franchises: they provide a 150-page Franchise Rule document to clarify exactly what information a business must supply in order to comply with the law. If there is anything fishy about the franchise you’ve got your eye on, the FDD will reveal it to both you and the government.

The SBA Franchise Registry

Another easy way to spot potential franchise trouble before it hatches is to check out the Small Business Administration’s Franchise Registry. The SBA is a very helpful branch of the US government that specializes in supporting small businesses, including franchises, in any way they can, and one such way is by providing financial backing to small businesses that otherwise couldn’t get off the ground. In the case of a franchise, the SBA asks for company information to ensure that the business model is a sound one, there is a history of success, and future success is fairly certain before they provide the financial support. What this practice has inadvertently produced is the Franchise Registry: a list of all the franchise companies that have already submitted their businesses for financial support when a new franchisee starts out. If a franchise is on the list, then the government has given it their stamp of approval and their trust, and so can you.

Learn From Other People

This seems like the most straightforward way to get information, and it truly is. If you want to find out what Adventures in Advertising is really like, talk to one of their franchisees. There is no one who will know better what the strengths and weaknesses of the franchise are, how effectively the business runs, and whether or not it’s a worthy investment. Of course, talking with only one DVDNow dvd rental kiosk franchisee may not give you a true perspective on things; because if one person has a negative opinion simply because a work from home vending business just wasn’t a good fit for him. But if you talk to a dozen franchisees, you should be able to figure out exactly what your future franchise will be like. You don’t have to stop at franchisees, the Better Business Bureau can also offer you information on the franchise you’re looking at, based on the reviews of concerned consumers. If, in their database, the BBB has 200 negative consumer reports in regard to the internet business that’s recently caught your eye as a potential opportunity, you may want to rethink the choice, because that many unique negative reports probably means there is some merit to the complaints.

When you’re looking at franchise businesses, there is no such thing as over-researching. Truly, most opportunities that you’ll find, especially through franchise brokers, are trustworthy businesses. But even if research doesn’t unearth a huge moral or professional flaw in the infrastructure of the business, it might just tell you some things about the way they practically run that won’t mesh well with your personality, lifestyle, and goals. There are plenty of factors to consider when starting a new business, and any knowledge you can get along the way will inevitably be helpful.

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