Franchise Foundations

Let our franchise attorney, noted franchise expert and former franchise owner evaluate your franchise investment, franchise companies, franchise offering circular (franchise disclosure documents) identifying the factors it takes to be a successful franchise before buying a franchise. Twenty-eight years of experience in reviewing over 500 franchise offering circulars (franchise disclosure documents takes the guess work out of buying a franchise, thereby avoiding pitfalls, surprises, lost savings and franchise litigation. Who needs any of that?

If you already own a franchise and have questions or concerns about your franchise relationship, franchise offering circular, or a franchise complaint, contact our AAA franchise legal help hotline, a free referral service for franchise disputes, franchise lawsuits and franchise litigation matters. Call 1-800-942-4402.

BUYING A FRANCHISE - THE AMERICAN DREAM

FRANCHISE ATTORNEY EVALUATION OF FRANCHISE OFFERING CIRCULARS AND FRANCHISE INVESTMENTS BY A NOTED FRANCHISE EXPERT AND FORMER FRANCHISE OWNER

FEDERAL TRADE COMMISSION FRANCHISE CONSUMER PROTECTION PAGE - FRANCHISE COMPLAINTS

Millions of people dream about owning their own business. Having the independence that being your own boss brings, the security that no one can fire you, enjoying a good income - and for the most successful - the accumulation of wealth and prosperity. Unfortunately, the cards have become stacked against a new small business making it big - or making it at all. An endless stream of problems makes competition from large, sophisticated chains just too intense. Most new start-ups end as failures.

THE FRANCHISE INVESTMENT OPTION
Buying a franchise business opportunity may help level the playing field. The U.S. Department of commerce claims a franchise is "…the best chance to compete with giant companies that dominate the marketplace." Some statistics are impressive: it is said over 40% of all U.S. retail sales are through franchised establishments. While giants like McDonalds, KFC, 7-Eleven, H&R Block and Radio Shack are familiar, household names, franchises are available in a wide range of industries. The list of 3,000-plus companies that span 150 different franchise categories includes such favorites as: automotive, beauty & health, business services, fast food, home improvement, hotels & motels, printing, publishing, retail, sports, travel, and more. But just as franchising represents a chance to get rich, it's also a chance to get stung. An alarming number of franchised operators make less than the minimum wage, working 7 days and 60 to 80 hours a week, pursuing an expensive and elusive American Dream that turns into a nightmare of epic proportions. These cases of franchise failure can and should be prevented.

GETTING INFORMED
Regrettably too many over-eager, first-time franchise buyers leap into buying a franchise without understanding the in's and out's of a franchise relationship, the viability of the industry or company they have selected, or the long-term franchise contract they are signing. If you don't know what you're getting in to, or pick a marginal industry, company or concept, you could lose everything (worst case) or it may be many years before you begin to see any return on your franchise investment. Or, like many, many franchise operators, you discover that all you’ve bought is a job earning less than the minimum wage, while working long hours and having lots of financial exposure and headaches. Fortunately, with proper planning, research, investigation and sound advice, these risks can be minimized.

NEGOTIATING FRANCHISE AGREEMENTS
Many franchise companies tell prospective franchise buyers their contract is not negotiable. While this may be a good negotiating strategy on their part, (saving them time and money, as well as making franchise buyers question the need to seek full, independent review by legal counsel) experience shows this is simply not true in a number of situations. I reviewed a Franchise Offering Circular for a quick oil change franchise years ago. At the time, the company had sold a couple dozen franchises, but was trying to sell its first one on the west coast in California. My client (the buyer) was told the company had its own in-house, on their payroll franchise attorney, who drafted the franchise contract and related documents using her years of experience in the franchise industry to produce a fair and balanced franchise contract. The franchise company concluded by saying although it was prepared to listen to any comments made by an attorney representing the franchise buyer, the contract was basically "take it or leave it."

Because the company had an in-house franchise attorney, I assumed she’d done a good job on the documents (franchise offering circular, franchise agreements, etc.) per the statements made to my client. Bad assumption. Turned out, she'd practiced franchise law a couple years, but obviously had a lot to learn. I ended up writing almost five pages of comments about various provisions of the franchise agreement that were either blatantly unfair or inconsistent with the rest of the franchise industry, particularly within that segment.

The result: the franchise company amended its Franchise Offering Circular and franchise agreement to change each and every provision per my comment letter. They ended up with a much better document for both parties. Hmmm... should have sent them my legal bill.

BUT THE FRANCHISE COMPANY IS REGISTERED TO SELL FRANCHISES
Don’t ever assume that just because a company has "registered" its Franchise Disclosure Documents in your state via a franchise registration process, someone at the state has approved the franchise offering circular. Franchise registration is a rubber stamp obtained by forwarding the legal documents and paying a filing fee - period. In most cases, franchise offering circulars are given an extremely limited review to ensure state-specific franchise disclaimers are present on one page of the franchise offering circular or franchise agreement. Despite this, some franchise companies misleadingly refer to their franchise registration as the state's "stamp of approval."

BUT THE FRANCHISE COMPANY MUST MEET CERTAIN STANDARDS TO SELL FRANCHISES
Another bit of incredible information you're not likely to find anywhere else: there are no minimum standards required (like business background, financial stability, net worth, operating the business a minimum period of time, etc.) to offer or sell franchises. No standards, none, nada. You and I could have no background in any business, operated the "prototype" for only a couple weeks (or not at all), form a new corporation or LLC and capitalize it with only $1. Of course, we'd have to put together a Franchise Offering Circular (FOC), franchise agreements, and financial statement (showing our $1 cash and stock issued for $1). And we should disclose the utter lack of business background and operating experience, etc. as risk factors on the cover page of the cover page of our Franchise Offering Circular (not all franchise companies meet their risk and other disclosure responsibilities in the FOC). With our newly printed FOC, we could sell as many franchises as possible. You'd think the franchise regulations that have been in place since 1971 (starting with California's Franchise Investment Law) would protect against these basic investment risks, right? Wrong. Caveat emptor (buyer beware) and competent, professional advice are your best and only defenses. Of course, you could try to save money up front, get involved with a questionable franchise, and lose your entire investment (including perhaps your home and retirement savings), then hire a franchise attorney to try and recover damages. Problem is, you're probably broke at that point and could never afford the $10,000 or $20,000 retainer it takes just to get things started and learn what you should have learned initially - and at a fraction of the cost.

Hopefully, with this introduction to some of the realities of franchising and franchise investments, you're ready to consider:

FRANCHISE ATTORNEY EVALUATION OF FRANCHISE OFFERING CIRCULARS AND FRANCHISE INVESTMENTS BY A NOTED FRANCHISE EXPERT AND FORMER FRANCHISE OWNER
Our franchise attorney, noted franchise expert and former franchise owner can evaluate your franchise offering circular and franchise investment. Let his 28 years of experience in the franchise industry evaluating over 500 franchise offering circulars and franchise ownership experience begin working for you. Our firm offers a comprehensive spectrum of franchise evaluation services so intelligent decisions can be made BEFORE funds are invested and long term franchise contracts are signed. We do not receive commissions from any franchise company or other special interest group. This allows us to represent your interests first, foremost and always. If we feel a particular franchise is questionable, or that franchising is not appropriate for you, we will tell you this up front and discuss other options. The services we offer to prospective franchise buyers include:

1. PERSONAL FRANCHISE PROFILE (sm)
An invaluable consultation with one of our franchise specialists to review your background, business interests, goals, financial and personal situation, including some personality testing. This assessment will:

• Help you decide if a franchise investment is something you should consider further or forget about entirely. Although franchise relationships work for some, they are definitely inappropriate for certain individuals. Pursuing a franchise if a franchise investment isn't in your cards will only spell disaster.

• Educate you about franchise fees, royalties, protected territories, network advertising funds as well as what to expect in the way of training, start-up assistance and ongoing support.

• Identify the industries that match your profile. .

Call or email for appointment information. The cost of the Profile is $500..

2. FRANCHISE FINDER (sm).
If you would like a list of major franchise companies for a particular category such as Fitness Centers, Coffee Shops, Pet Stores or any of the other 150 different franchise categories, just let us know and we'll begin our Franchise Finder (sm) service. Since 1985, this service has helped clients throughout the U.S. locate franchise companies. Armed with our list, you can begin contacting all potential companies in your category of interest. Contacting 10 to 20 different companies for free franchise information packages is absolutely the best way to begin the franchise investment investigation phase. Pricing varies depending on the categories and parameters of information desired. Call or email for pricing information.

3. FRANCHISE CHECKER (sm).
If you already have a specific franchise company in mind, our franchise attorney can perform a detailed, in-depth background check and investigation using our Franchise Checker (sm) service that results in a comprehensive written report of findings. Within Franchise Checker (sm) franchise companies are rated on the basis of the following factors:

• Franchise Management Depth & Abilities

• Financial Resources

• Franchise Track Record

• Franchise Litigation History

• Franchise Turnover Rate

• Existing Franchisee Satisfaction

• Franchise Agreement Fairness

• Other proprietary Franchise Checker (sm) factors based on our franchise attorney and franchise expert's 28-plus years of experience in evaluating over 500 business format franchises and our franchise expert's background in owning and operating a successful franchise.

You'll also receive a franchise agreement summary with a detailed analysis of the proposed franchise agreement indicating areas or provisions you definitely want to consider or negotiate before making a 10-20 year commitment. Despite what many franchise companies may say initially, our two-plus decades of experience in franchising proves a lot can be negotiated in certain circumstances. Our Franchise Checker (sm) Reports often highlight concerns or negotiating areas that are ignored or downplayed by many attorneys and franchise consultants.

Our Franchise Checker (sm) Reports are prepared using the most current data and information available, so you won't receive a "boilerplate" report prepared for a previous client. Our experience shows a "positive" recommendation for a particular franchise company one year has turned to a "negative" recommendation based on the current situation of the particular franchise company. Call or email if you are interested in this invaluable service. Franchise Checker (sm) is billed hourly at $400 per hour An advance retainer is required to start this service.

Investing in Franchise Checker (sm) before signing long-term franchise agreements, spending large sums of money up-front ($200,000+), and a multiple of this amount during the course of a 10-20 year franchise relationship, simply makes good business sense.

4. FOC EVALUATOR (sm).
A streamlined version of our popular FRANCHISE CHECKER (sm), but here the focus is a brief overview of the disclosures, financial statements and contract in a company's Franchise Offering Circular (Franchise Disclosure Document) to see if the franchise investment deserves more serious consideration. As with Franchise Checker (sm), investing in FOC Evaluator (sm) before signing long-term franchise agreements, spending large sums of money up-front, and an even greater amount during the course of a 10-20 year franchise relationship, simply makes good business sense. The cost of the FOC Evaluator is a flat $500 for FOC's that total 100 pages or less. We recommend doing an FOC EVALUATOR before embarking on the more detailed FRANCHISE CHECKER.

5. FRANCHISE RESEARCH
We can research and publish a report on almost any franchise topic or subject. Call or email for pricing and details.

YOUR NEXT STEP
A franchise investment will be the most important financial and emotional decision you will ever make. Call today to let our 25-plus years of successful experience in the franchise industry begin working for you.

IMPORTANT FRANCHISE ARTICLES TO READ .
For useful franchise information and tips on evaluating franchise investments, please read our Franchise Articles II page Buying A Franchise - Evaluating Franchise Investments - Tips From A Franchise Attorney and Franchise Expert. Also read the Article Mr. Franchise (and Mrs. Franchise) Buy Their First Franchise to see how the franchise investment tips and advice worked out in a first-time franchise investment experience.

FEDERAL TRADE COMMISSION FRANCHISE CONSUMER PROTECTION PAGE - FRANCHISE COMPLAINTS You can also visit the Federal Trade Commission's Franchise Consumer Protection Information Page. It contains interesting information about franchises and business opportunity ventures.

If you're having a problem with a particular franchise, there's also a link there for filing an online franchise complaint for investigation by the FTC. But don't hold your breath if you do file a franchise complaint. With limited resources, the FTC only gets involved if there are enough franchise complaints and the franchisor (the company selling the franchises) is big enough to justify an enforcement action. A 1993 government report found the FTC acted on less than 6% of all franchise complaints. The U.S. General Accounting Office reports that franchise complaints to the FTC from franchise owners increased ten-fold from 1997-1999. This dramatic rise is profound considering complaint data was only available through June 30, 1999. Since 1998, according to the FTC's website listing franchise enforcement actions, only one enforcement action was taken against a franchise company.

FTC CONSUMER FRANCHISE COMPLAINT UPDATE
Want to file a franchise complaint? Another incredible, but true story. You'll never believe it, but the FTC's online consumer complaint form at its website does not even list "Franchise" as a possible subject of investigation. What's the name of the FTC's Rule? Hmmm.... let's think a minute.. that's right, it's the FTC Franchise Rule, 16 CFR 436 - Hello? Is anybody home? Since a subject MUST be selected from the available list in order to send the complaint (or you get an error message), and "Franchise Complaint" isn't on their list, we're recommending you select "Business Opportunities" as a complaint subject in order to get your franchise complaint filed. We did just that and contacted the FTC through its online Consumer Complaint Form, detailing this glaring oversight. All we received was a form letter saying an FTC consumer counselor reviewed the information we sent, and an electronic response was attached. Unfortunately the response was just another generic form letter thanking us for identifying “possible targets for enforcement of the Commission’s trade regulation rule on franchises and business opportunities.” The response ended by saying the FTC will enter our information into its electronic database to share with FTC attorneys and investigators, and thanked us for bringing the matter to their attention. Whether someone at the FTC will actually read what we filed, let alone act on it, is anyone’s guess. The probability of that happening is probably the same a winning a multi-million dollar lotto with a single ticket. At this point, those who haven't been able to file a franchise complaint at the FTC's website are still unable to do so, unless the complaint is sent under the “Business Opportunities” option. Even then, it doesn't look like anyone at the FTC is even bothering to read what's filed. Franchise Foundations has a franchise legal help hotline for legal issues and problems with franchise relationships. Call 1-800-942-4402