Don’t Invest in a Dog of a Franchise

Remember when finding a product or service required some real effort? In the days before Google, researching anything meant real effort and time but today, finding almost anything is as easy as a few clicks of your mouse.

Finding information on the Internet is so easy that it can make researching seem easier than it is, especially when you are looking to make a major investment, like buying into a franchising system.

Making that type of investment is very different than buying a sweater online. It means doing your actual due diligence and that isn’t just about finding out what people are saying, it’s about finding out the real issues facing the franchise you’re interested in.

If the extent of your research is online information gathering, you will probably have big troubles down the road. There is so much information on the Internet, but not all information is equal.

You will read about people who were dissatisfied with the franchise in the past or you may see unrealistic, glowing comments about the company. Either way, it’s hard to know what and who to trust when the extent of your research is done online.

That’s why you need to go straight to the source, which means that before you invest, you need to see the company’s FDD or Franchise Disclosure Document.

So what is an FDD?

An FDD contains all the relevant information you need to make an informed decision about the franchise including company background, past litigation, costs, franchisee obligations, lists of current and former franchisees, audited financial statements and more.

One of the most important issues for a perspective franchisee is whether the franchise in financial or legal trouble. You may not find out the truth about those issues online, but the FDD will spell those issues out for you.
Now keep in mind that an FDD is not an easy document to understand for the layperson. If you’re considering buying into a franchise, you should certainly have your lawyer check out the FDD, just so you’re certain the franchisor doesn’t have any skeletons in the proverbial closet that you didn’t know about.

Why do you need to read the FDD?

If the extent of your research is online information gathering, you will probably have big troubles down the road. Sure, there is a ton of information on the Internet, but not all information is equal.

Most of what you find on the internet will be anecdotal in nature. You will read about people who are unhappy with the franchise or you may see unrealistic, glowing comments about the company. Either way, it’s hard to know what to trust when the extent of your research is done online.

That’s why you need to go straight to the source and get the FDD.

Any reputable franchise will have no problem disclosing their FDD. In fact, most reputable franchises would want potential franchisees to see their FDD, so the franchisee knows exactly what to expect in the relationship with the franchisor.

But the FDD isn’t the only resource you should look into, talk to current franchisees and ask them about their relationship with the franchisor. Find out if the franchisor provides strong support to its franchisees or if there are issues that haven’t made it to the FDD. This will help you develop a complete picture of the franchise from both ends.

Simply put, if you research the franchise’s FDD and ask around about the franchise itself, you’ll know exactly what you’re getting into before you make any investment, making the experience of being a franchisee far more rewarding.

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Tags: ActionCOACH, business advice, business coaching, Franchise, franchisee, franchisor, Jodie Shaw, systems and requirement