Franchise Buying Guide

Shop, Look & Listen

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Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

The Uniform Franchise Offering Circular (UFOC) is a key source of information for evaluating a franchise. The law requires the franchisor to give you this document at the first personal meeting you have or 10 or more business days before a franchise sale is completed. You should request one from your franchisor as soon as you think you might be serious about its program. Here are a few highlights of the UFOC information you'll need in order to compare franchises:

  • Items 5 and 6 summarize initial franchise fees, ongoing royalty rates and other charges.
  • Item 7 is a chart showing the franchisor's estimate of the typical total investment.
  • Item 10 discloses financing. Many franchisors either provide financing to franchisees or arrange with banks or other lenders to assist franchisees.
  • Item 12 summarizes the territorial rights granted with each unit.
  • Item 19 presents earnings claims--information about system or unit performance, such as average gross sales or profits--if the franchisor chooses to supply it.
  • Item 20 presents, in chart form, systemwide statistical information, plus lists of current franchisees and those who have left the system in the past year.

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This article was originally published in the May 1998 print edition of Entrepreneur with the headline: Shop, Look & Listen.

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