Shopping at a Franchise Exposition
Reprinted from the
Commission's A Consumer Guide To Buying A
Attending a franchise exposition allows you to view and compare a
variety of franchise possibilities. Keep in mind that exhibitors at
the exposition primarily want to sell their franchise systems. Be
cautious of salespersons who are interested in selling a franchise
that you are not interested in.
Before you attend, research what type of franchise best suits
your investment limitations, experience, and goals. When you attend,
comparison shop for the opportunity that best suits your needs and
Know How Much You Can Invest
An exhibitor may tell you how much you can afford to invest or
that you can't afford to pass up this opportunity. Before beginning
to explore investment options, consider the amount you feel
comfortable investing and the maximum amount you can afford.
Know What Type of Business is Right for You
An exhibitor may attempt to convince you that an opportunity is
perfect for you. Only you can make that determination. Consider the
industry that interests you before selecting a specific franchise
system. Ask yourself the following questions:
- Have you considered working in that industry before?
- Can you see yourself engaged in that line of work for the
next twenty years?
Do you have the necessary background or skills?
If the industry does not appeal to you or you are not suited to
work in that industry, do not allow an exhibitor to convince you
otherwise. Spend your time focusing on those industries that offer a
more realistic opportunity.
Visit several franchise exhibitors engaged in the type of
industry that appeals to you. Listen to the exhibitors'
presentations and discussions with other interested consumers. Get
answers to the following questions:
- How long has the franchisor been in business?
- How many franchised outlets currently exist?
- Where are they located?
- How much is the initial franchise fee and any additional
start-up costs? Are there any continuing royalty payments? How
- What management, technical, and ongoing assistance does the
- What controls does the franchisor impose?
Exhibitors may offer you prizes, free samples, or free dinners if
you attend a promotional meeting later that day or over the next
week to discuss the franchise in greater detail. Do not feel
compelled to attend. Rather, consider these meetings as one way to
acquire more information and to ask additional questions. Be
prepared to walk away from any promotion if the franchise does not
suit your needs.
Get Substantiation for Any Earnings Representations
Some franchisors may tell you how much you can earn if you invest
in their franchise system or how current franchisees in their system
are performing. Be careful. The FTC requires that franchisors who
make such claims provide you with written substantiation. This is
explained in more detail in the section "Investigating Franchise
Offers." Make sure you ask for and obtain written substantiation for
any income projections, or income or profit claims. If the
franchisor does not have the required substantiation, or refuses to
provide it to you, consider its claims to be suspect.
It may be difficult to remember each franchise exhibit. Bring a
pad and pen to take notes. Get promotional literature that you can
review. Take the exhibitors' business cards so you can contact them
later with any additional questions.
Avoid High Pressure Sales Tactics
You may be told that the franchisor's offering is limited, that
there is only one territory left, or that this is a one-time reduced
franchise sales price. Do not feel pressured to make any commitment.
Legitimate franchisors expect you to comparison shop and to
investigate their offering. A good deal today should be available
Study the Franchisor's Offering
Do not sign any contract or make any payment until you have the
opportunity to investigate the franchisor's offering thoroughly. As
will be explained further in the next section, the FTC's Franchise
Rule requires the franchisor to provide you with a disclosure
document containing important information about the franchise
system. Study the disclosure document. Take time to speak with
current and former franchisees about their experiences. Because
investing in a franchise can entail a significant investment, you
should have an attorney review the disclosure document and franchise
contract and have an accountant review the company's financial
Reprinted from the Federal Trade
Commission's A Consumer Guide To Buying A Franchise.