THE JOURNEY TO
Franchise Ownership through Due Diligence By Lynne D. Shelton, Esq.
A
mericans all over the country dream of owning their own business. Many look to franchise ownership as a way to realize this dream while reducing the start-up risk and expense. This three-part series will provide key information on how to evaluate and buy a franchise, along with the steps of due diligence needed to not only begin your journey of business ownership, but achieve it – soundly. For anyone unfamiliar with franchising, you should understand some of the terminology before getting in too deep. This is especially important in this industry, because they use a lot of jargon and abbreviations. First is the term franchisor (commonly shortened to “Zor”). In your journey to franchise ownership, you will learn that a good franchisor is a successful business person who sells a model of his or her success, so that others, like you, may reap the benefits
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of their experience, business savvy, time, and financial investments, and even their failures, thereby allowing their franchisees to avoid the learning curve of mistakes. Next is franchisee (commonly shortened to “Zee”). This should not be thought of simply as the person who buys a franchise and follows the franchisors rules. The purchaser is more than that. As a franchisee, you truly are an entrepreneur who buys a business from another entrepreneur, the franchisor, who has created a successful, proven franchise system, creates jobs in the local economy and builds a career for themselves and a vehicle for their own financial future. Lastly is the infamous franchise disclosure document (commonly shortened to “FDD”). Although it can be an intimidating document, the FDD is a sales and analysis tool required by both state and federal laws. The FDD legal document is required by law to be provided to you at least 14 days before the franchisor is allowed to accept any money or signed
agreements, such as the franchise agreement or an area development agreement. The FDD will set out how much the franchise will cost, what your roles and responsibilities will be, and what the franchisor must do to help you during the franchise relationship. Now that you understand the terminology used, it’s time to look at why you should consider owning a franchise. Many people don't understand the power of franchising. Franchising as an industry does more for the U.S. economy and job rate than any other industry. Although helping the economy and job rate is a noble cause, most people go into business for themselves to be their own boss, have job stability, or build something to benefit themselves and their families. Franchising is a great vehicle
“MANY PEOPLE DO NOT UNDERSTAND THE POWER OF FRANCHISING. ”
