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Hi I'm Doug Lubic. I'm a shareholder with the Wilentz firm practicing in corporate and
transactional matters. Franchise businesses can provide a means for new or inexperienced
business people to jump start a successful business and work for themselves.
It's not a foolproof means, however. Not every franchise will become a new McDonalds. Before
committing to a franchise business you must ask many questions and think very carefully
about the answers. Franchises are not consumer products and you cannot assume that they are
safe and effective. The rule here is caveat emptor, let the buyer beware. As a prospective
franchise owner you'll receive a disclosure statement that describes the relationship
between the franchisor company and its franchisees. Although it looks official and may be filed
with the government agency, the government has not approved the franchise or certified
it as safe and effective. The disclosure statement provides you with information about the franchisor
company and its franchisees, but it is also a sales document designed to sell the franchise
to you. You should go beyond its pages before making your decision. Ultimately the relationship
between the business owner and the franchisor is determined by the franchise agreement,
not the disclosure statement.
Consider these points:
Industry - Is the franchise a type of business that is not well represented in the local
market or is there a lot of existing competition.
Exclusive area - How close to your location can other franchises be placed? Will they
affect your franchise's viability or its profitability?
Personal liability - What are your personal obligations if the franchise business does
not succeed? Do you have assets other than those you are using to start the franchise
business? You must consider what happens to you and your family if the business is not
successful.
Finances - What are the fees and royalties? Will you need to borrow money to set up the
franchise? It helps to have an accountant or other knowledgeable person assist you with
a business plan before making your decision.
Support - If you have business difficulties, will the franchise company help you? It is
wise to ask other franchise owners about their experiences.
Location - Do you feel the location is the right one? Franchise companies often make
location decisions based on demographic data and may not have on-the-ground knowledge about
the location. Is the lease fair? Is it extendable? Is it transferrable in the same manner as
the franchise itself?
The apparent benefits of a franchise business can be lost in the details of the franchise
agreement. We can provide you with the necessary knowledge to make an intelligent decision
that you will not regret in future years. If you have any questions about franchise
businesses or franchising, please feel free to give me a call at (732) 855-6408 or email
me at dlubic@wilentz.com. Thank you.
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