Franchise Detective If you really want to know the dirt on the franchise you're interested in, put your ear to the ground and start listening.

"About two weeks ago, we got the approval paperwork for areal estate franchise. My partner and I are now finding out thefranchise we bought has a bad name around town, and it'shampering our development. We had no idea about thisfranchise's bad reputation, and also that they had problems inthe past in our area. This is looming over everything we try to do.We want out, but we paid a $15,000 franchise fee and we want to getit back. Is this possible? We initially asked to cancel but weretalked back into it."

You really have to do your homework before you buy a franchise.Once upon a time, companies didn't franchise their operationsuntil they had dozens of outlets going in different parts of thecountry, so you knew you were buying a "sure thing." Withfranchising so popular now, fueled by middle-aged downsizedexecutives looking to buy themselves a job, more and morefranchises are being launched before they've had the chance totest and prove their business model. The result is often a lot ofunhappy franchisees.

While franchises are required to deliver a Uniform FranchiseOffering Circular to prospective franchisees disclosing certainfacts about the franchise and its business, they're notrequired to disclose any information about their reputation. Thisis something you have to find out for yourself.

Remember Ennico's Rule: When buying a franchise, gossip,hearsay and innuendo are far more important than hard data. Some ofthe best information you'll learn about a franchise will comefrom sources who will not want to be quoted.

You should talk to as many franchisees as possible and ask themif they were happy with their decision. In my experience, it'shard for people to hide it when they're really unhappy--be sureto watch their facial expressions and listen to the"music" in their voices as well as what they tell you.You should also ask the franchise for a list of ex-franchisees (thefranchise is required by law to disclose this to you), and talk toall of them. You should also visit two or three current franchiseesin person and spend the day looking at what actually happens intheir business.

But what about a franchise's reputation? There's noexcuse for not "Googling" the franchise and finding outwhat people are saying about it on the Web. The process takes aboutfive minutes. As for local reputation, call your local BetterBusiness Bureau. Visit the nearest library and chat up thelibrarians when they're not busy--they tend to know a lot thatgoes on in their community. And if they don't, ask the old mensitting in the magazine section. (In most libraries, there arealways old men sitting in the magazine section.)

Of course, it's too late for you to do that now thatyou've forked over the money. Most franchises won't giveyou your money back under any circumstances, and this is usuallystated very clearly in the franchise agreement. The concept is thatthe franchise incurred significant expense by training you in thefranchised business, as well as an "opportunity cost" byturning away other prospective franchisees once you signed on. Inpractice, however, many franchises will give you at least some ofyour money back if you yell and scream loudly enough. This isbecause they're concerned you'll complain to otherfranchisees about how unfairly you were treated, and the franchisewill want to keep "peace in the family."

Keep in mind, though, that if the franchise does refund yourmoney, you'll most likely have to sign a noncompete agreementsaying you will not engage in the same business as the franchisefor a number of years. By claiming a refund, you may be lockingyourself out of the real estate business entirely. Make sureit's worth the tradeoff.

Given the "hard sell" this franchise apparently gaveyou, I wouldn't expect them to be very flexible. You haveclearly been too gentle in negotiating with these sleazeballs, andyou now have an uphill fight ahead of you. If you're notcomfortable playing hardball at this point, hire an attorney to actas your "bad cop." A couple of nasty letters threateninglitigation should get these guys to the bargaining table.

Cliff Ennico is a syndicated columnist, author and host ofthe PBS TV series MoneyHunt. This column is no substitutefor legal, tax or financial advice, which can be furnished only bya qualified professional licensed in your state. Copyright 2004Clifford R. Ennico. Distributed by Creators Syndicate Inc.