Franchise Buying Guide

Information Please

What's Not There
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

As useful as it is, the UFOC is only one aspect of your research effort. It simply gives you an introduction to the fundamentals of the program. When you're done reading the UFOC, meet with a few current franchise owners. This is your chance to ask questions about the business, the franchisor and those topics not addressed in the UFOC.

For instance, the UFOC won't tell you about any industry trends that could affect the franchise program in the future. Are there any hot new competitors coming into the market? Is the market for the franchise's products or services in general ascent or decline? Seasonal franchisees are well aware of these industry currents.

The UFOC also won't tell you anything about competition among franchise owners or how the franchisor handles the placement of franchised units in proximity to one another. Many franchisees will tell you they dread the placement of another franchise anywhere near their location because of the negative impact it may have on their location's numbers. Find out whether the system you're considering faces this issue.

If a franchisor wants to tell you about typical store sales last year, or about sales profits achieved by franchisees in the system, that information will appear in Item 19 of the UFOC. It's not required, however, and most franchisors opt not to tell you how their franchisees are performing. If it isn't covered, make sure to ask current franchisees how their businesses are doing. Have they met the expectations they had going in? Are sales revenues seasonal? What were their gross sales in the last calendar year? It may be that the franchisor won't deliver earnings information because it doesn't paint a very attractive picture of the franchise program.

Find out how system governance issues are resolved in the franchise system. The UFOC doesn't tell you whether the franchisor provides a structured process for accepting franchisee input on potential new products or marketing strategies--or anything at all. Ask.

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