A good bit of research is required before making any smart business decision. Before making the leap into a franchise scheme, make sure you investigate the franchisor thoroughly before you sign on the dotted line.

In addition to reading the company's disclosure document and speaking with current and former franchisees, you should speak with the following:

A Lawyer & Accountant can help you through the franchise maze
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 accountact, rather than those of the franchisor.

How can I find a lawyer who specializes in franchising?

You can start by checking with your state bar association. Many state bar associations allow member lawyers to identify the areas of practice in which they specialize, and franchise or distribution law is a recognized specialty in an increasing number of states.

The American Bar Association also publishes a Membership Directory of the Forum Committee on Franchising. The Directory, which is organized by state and city, lists the names, addresses and telephone numbers of attorneys who are members of the Forum Committee. To obtain a copy of the directory, an individual must be a member, it is not for sale to the public. Individuals may contact the ABA leadership for referrals or may be faxed a partial listing. For more information, check out www.abanet.org/forums/franchising.

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 franchise tips
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.

Government Departments regulating franchises
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 like Getting Business Credit and Buying by Phone. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them.

To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Source: Federal Trade Commission

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