Before you invest in a franchise system, investigate the franchisor thoroughly. In addition to reading the company's disclosure document and speaking with current and former franchisees, you should speak with the following:
Lawyer and Accountant
Investing in a franchise is costly. An accountant can help you understand the company's
financial statements, develop a business plan, and assess any earnings projections and the
assumptions upon which they are based. An accountant can help you pick a franchise system
that is best suited to your investment resources and your goals.
Franchise contracts are usually long and complex. A contract problem that arises after you have signed the contract may be impossible or very expensive to fix. A lawyer will help you to understand your obligations under the contract, so you will not be surprised later. Choose a lawyer who is experienced in franchise matters. It is best to rely upon your own lawyer or accountant, rather than those of the franchisor.
Banks and Other Financial Institutions
These organizations may provide an unbiased view of the franchise opportunity you are
considering. Your banker should be able to get a Dun and Bradstreet report or similar
reports on the franchisor.
Better Business Bureau
Check with the local Better Business Bureau (BBB) in the cities where the franchisor has
its headquarters. Ask if any consumers have complained about the company's products,
services, or personnel.
Uniform Franchise Offering Circulars
The Uniform Franchise Offering Circular, or UFOC, is a
document containing detailed information about a franchise. Its contents
are regulated by the FTC and are designed to assist you in analyzing the merits
of a potential franchise. A UFOC is made up of three parts: 23 items describing
various aspects of the franchise offering, 2) up to three years of the franchisor's
audited financial statements, and 3) the franchise agreement that the franchisee
must sign if he/she intends to buy the franchise. Visit
UFOCs to learn more.
The Franchise Registry
The Registry lists names of franchise companies whose franchisees enjoy the
benefits of a streamlined review process for SBA loan applications. Loan
applications for registered franchisors can be reviewed and processed quickly
and efficiently. Small business owners get better service and quicker loans. Visit
The Franchise Registry to learn more.
Government Departments
Several states regulate the sale of franchises. Check with your
state Division of
Securities or Office of Attorney General for more information about your rights as a
franchise owner in your state.
Federal Trade Commission (FTC)
The FTC publishes other information that may be
of interest to you, including business
guides.
Learn more about:
Components of a Typical Franchise System
Before Selecting a Franchise System
Selecting a Franchise
Shopping at a Franchise Exposition
Investigating Franchise Offerings
Information courtesy of the Federal Trade Commission.
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