There are two faces of franchising. One face offers the glittering smile of enormous financial rewards and conjures up visions of Ray Kroc (McDonald's) and Colonel Sanders (KFC) and the thousands of millionaires they've helped into business. These pioneers made franchising a household term with their motto: "Get in early, build multiple stores fast and make a million."
The other face is the darker side of the franchising story. The early years of franchising growth culminated in a "60 Minutes" TV report titled "From Burgers to Bankruptcy," which aired in December 1978. The show told the story of a couple of slick guys in rented Rolls-Royce automobiles and gaudy jewelry who sold the empty promise of phony fast-food success on the strength of their outrageous claims of instant wealth. The motto of this face of franchising: "Fast-buck artists selling hot air on the promise of success."
Understanding the dual nature of franchising is an essential step in the task of finding the right investment for your interests and resources. Go to a franchise trade show, and notice the pace of the sale. It's fast. It's a hard sell. And, all too often, it is accompanied by exaggerated claims of earnings potential. The other face of franchising can be difficult to uncover, but there is good news: The law is on your side, and you will be prepared for the process if you do your homework and bring diligence to your task.
Andrew A. Caffey is a practicing attorney in the Washington, DC, area, a former General Counsel of the International Franchise Association, and an internationally recognized specialist in franchise and business opportunity law.