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Thinking Franchise? Protect Yourself First

Although going into business for yourself may seem like a good idea, running a franchise company takes resourcefulness and planning. Robert Purvin, founder of the American Association of Franchisee & Dealers, offers tips on navigating the field.

Purvin, also the author of “The Franchise Fraud: How to Protect Yourself Before and After You Invest,” says being true to yourself about your reasons for entering the franchise game is the first step. If you’ve got your own ideas on running a company, and don’t want to follow a model or don’t like interacting with the public, move on to other interests, says Purvin.

Be sure to toot your own horn. If you have countless contacts, a large amount of capital to work with or are a master budgeter, share that with the franchisor because that makes you a more attractive owner. The more you bring to the table, the more the franchisor will be willing to negotiate with you for what you want.

Since you’re going into business to make money, do your research. Determine whether the amount of time and money you are planning to invest will be returned to you in the long-run. Be prepared to walk away if the company fails to provide you with details to make a proper evaluation.

Evaluate the overall franchise system. Investors are often enticed by the “sure thing” promise of a franchise, but should consider whether the company will work as represented and if it is flexible enough to change with the market.

Retaining a good lawyer is key to helping you understand your franchise agreement. Franchisees should confirm that the contract they are signing provides for significant ownership of the franchise, if that’s what they are looking for. Be sure to read the fine print. A knowledgeable attorney can also help you outline your options for relinquishing the franchise, whether that is by retirement, an illness, your franchise rights expire or you simply want to sell.

And since there are so few laws that govern franchise ownership, the AAFD recommends only working with franchise companies that have strong franchise owners’ associations.

Robert Purvin is the chairman/CEO of the American Association of Franchisee & Dealers (AAFD), a national non-profit trade association that represents franchisees and independent dealers. For more tips on franchising, check out his Web site at here.

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