International Law

What Can You Expect out of A Franchise System?

Image by &_yo via Flickr

Fuwa, the pseudonym of a well respected business consultant,  writing over at Blue Mau Mau, provides some much needed perspective on business format franchise systems and the "proven system" myth.

"People need to stop entertaining these fantasies that the sweeping vast majority of franchises offer them something that is worth the risk ensued - period.

Here is some advice, DO NOT even waste your time glancing at a franchise where the USP is not compelling.

This means the business either drops business in your lap you would not otherwise get, for a price on a per drop basis that is win-win, you can get goods at a substantially lower price than the competition (and the zor is contractually obligated nto to mark up the price, take kick-backs etc), the brand drives consumers to you in droves, or the zor has a method, process, or production method in place that you can not readily duplicate or substitute."

Since a franchisor isn't required by law to have a proven system, only that they disclose to the prospect certain material facts about their system, you have to evaluate the claims of the franchisor within the context that Fuwa has laid out

What does their disclosure document say about: a) rebates, who owns them franchise or franchisor? b) does the franchisor have any patented processes? (Might be also good to know if their brand actually has a trade mark.) c) how does the advertising work?

All claims that can be tested by reading the FDD and doing a bit of homework.

Full post as published by Misleading Advertising Law on December 08, 2008 (boomark / email).