Advice from the FTC on Buying a Franchise

Without a doubt, franchising can be the perfect career move for someone with the right temperament and experience. But it’s important to note that franchising isn’t necessarily for everyone. Before you even consider pursuing a franchise opportunity, there are some things that you must think through in order to ensure that you’re going into the whole experience with your eyes wide open.

Thankfully, the Federal Trade Commission (FTC) has some helpful tips for how to properly assess a franchise opportunity. With these tips, you’ll be able to accurately judge whether or not a franchise is right for you and whether or not joining on with a particular franchise is all that it’s been made out to be.

Do a Self-Assessment First

Like we mentioned earlier, it’s important for you to understand the kind of entrepreneur you are before you lock yourself into a franchise contract. And that’s the thing – in almost all cases you will be locking yourself in. So, you’ll need to strongly consider whether or not you wish to continue doing business in that location for the long term. If you’ve been envisioning yourself making the move to a different location where opportunities might be more fruitful, then committing to running a franchise for five to 10 years might not be the best idea.

Also, even if things don’t work out for you as a franchisee for a particular business, you’ll still be required to complete your contract. This is why it’s vitally important that you take stock of your current financial situation before you enter into a franchise contract. Be honest with yourself about your current financial outlook before you make the huge investment that franchising requires.


You should also note that working in a franchise setting is not entirely the same thing as owning your own business. While you’ll still be responsible for running and maintaining the business that’s been entrusted to you, you won’t be able to take a maximal level of control over most things. For some entrepreneurs this could be a good thing, but for others it could be bad.

If having some of the heavy-duty product and marketing work done for you sounds like a good thing, then being a franchisee might be perfect for you. If, on the other hand, you don’t like being told how you should be running your business, then perhaps you should rethink buying a franchise.

Do Your Investigative Work

The Federal Trade Commission requires that a franchisor provide you with a copy of their Disclosure Document. This document contains a lot of vital information about the franchise and its current legal and financial status. If a franchisor fails to provide you with this document, that’s a serious red flag, and you should likely not pursue investing any further. If they do provide it, which they most likely will, then its time for you to do some research.


Obviously any legal actions or bankruptcy information is something you’re going to want to look into. If the Disclosure Document specifies any information about these things, then it’s incumbent upon you to look into these matters further. If you make the decision to invest in the franchise, you’re taking the franchisor’s system warts and all, and you want to make sure that you’re able to deal with what’s being offered.

In addition to this, you’ll also want to pay close attention to the section that discusses current and former franchisees. Take the information that you find there and try to form a picture of how the franchise is performing on the whole.

In addition, you should also find contact information for other franchisees. Reach out to them and see what they have to say about working with the franchisor that you’re considering. Often, what they have to tell you will be more informative and more important than anything you can find by researching on your own.

If you’d like to read more about how the Federal Trade Commission advises people to appropriate assess and vet a franchise opportunity, then we’d encourage you to take a look at the extensive guide they offer free of charge.

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