Franchising is a popular way of starting and running a business in a particular territory. You can buy a franchise for various businesses such as restaurants, retail stores, or even health clubs. Buying a franchise might seem like an easy way to join the business world, but what if you are scammed?
There are many ways to avoid being scammed when buying or selling a franchise, including ensuring that the franchisor is registered with the U.S. Federal Trade Commission (FTC) and working with a master franchisee lawyer. This will ensure that they are following all the FTC regulations and that they will not scam you out of your money.
Warning Signs of Master Franchising Opportunity
It is not easy to spot a scam, but here are warning signs that you should be aware of:
- You are asked to pay for something before you receive it.
- You are required to take out a loan or mortgage.
- You are asked for your credit card number, bank account information, or social security number.
- The business opportunity is too good to be true.
- The business opportunity does not seem legitimate, and the people involved don’t seem trustworthy.
Different Levels of Investing in a Master Franchise
The level of investment in a franchise depends on the type of business that you are looking to invest in. The most common types of franchises are:
- Multi-unit franchisor. This is for people who want to invest in many different locations.
- Single-unit franchisor. This is for people who want to own and operate just one location.
- Master franchisor. This is for people who want to provide one or more types of products or services under their own name and brand but also offer franchises.
- Area developer. This is for people who want to develop an entire geographic region by opening up single unit locations with the help of a master franchisor.
Choosing the Right Master Franchise for You
A franchise is a business owned and operated by an individual or company under the terms of a contract with a franchisor. A master franchise is a franchise partnership in which the franchise brand owner grants a prospect the right to have other franchisees in a particular territory. A franchisee is an individual who buys the right to operate a particular business from the franchisor, usually for a set period and in return for royalties or other payments.
There are many franchises, and choosing one that best suits, you can be challenging. Below are things you want to keep in mind when choosing your perfect franchise opportunity.
Consider What Kind of Industry You Want to be In
Some questions you want to ask yourself include, do you want to run your own business, or would you prefer franchising? What are your financial goals? What kind of lifestyle do you want?
Create an Entity Before Signing a Franchise Agreement
The type of entity you choose will depend on your specific needs as well as the type of business you are starting. The franchise agreement itself will determine the type of entity you must use. For example, if your franchise agreement states that you must be a sole proprietor, then it doesn’t matter what type of entity you choose as long as it is a single owner.
It is important to remember that there is a filing requirement with the state for entities. Also, many master franchise agreements require that you not be an “inactive” entity. If you cease to exist, the franchisor can go after your assets to collect the money owed. Avoid this by seeking legal counsel before signing a franchise agreement to protect the business from creditors.
Attend Discovery Day and Ask a lot of Questions
People are often anxious about the idea of attending a conference or event. They worry that they will be out of place and not know what to ask. To make sure you get the most out of Discovery Day, here are some questions you can ask:
- What is your goal for this event?
- What is your elevator pitch?
- How do you define success?
- How do you measure success?
- What are your biggest challenges right now?
Hire a Master Franchise Lawyer to Review Your FDD and Franchise Agreement
The franchise disclosure document is a must-read before you sign any agreement. It will give you detailed information about the franchiser, the franchisee, and the franchised business. The franchise agreement is a contract between the franchiser and the franchisee that will spell out all your rights and responsibilities.
A franchise disclosure document will always be provided to you before signing any agreement. The document is required before buying into any franchising opportunity, as it will provide important information about the franchiser and the business.
It is important to note that not all master franchises are created equal. Some are more successful than others. You want to make sure you find the right franchise opportunity for you. Retain a master franchisee lawyer to protect yourself when buying into a franchise.
