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Franchises Under the Magnifying Glass

How to choose the right company and get resources to run your own business

5 Red Flags to Watch For


En español

  1. You don't receive a Franchise Disclosure Document. Legally, you must receive an FDD detailing everything need to know at least 14 days before you sign a contract or pay the fees.

  2. The FDD doesn't fill you with confidence. Beware of franchises that have declared bankruptcy in the past, have experienced high turnover among franchise owners or have been sued a lot.

  3. You feel pressured. A franchisor who seems too eager for you to sign the papers may be desperate and involved in a losing proposition.

  4. The franchisor lacks experience. If a company began offering franchises a year after opening for business, let it experiment on someone else. It takes at least three years for businesses to prove themselves successful enough to be cloned.

  5. Other franchisees aren't enthusiastic. If current franchisees suggest you to run away as fast you can, thank them. And be wary if the corporate office suggests whom you should talk to; it may be steering you away from unhappy franchise owners.

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