If you’ve just attended a franchising convention or a sales presentation, read an inspiring novel, or have a dream in front of you, it’s like you want to hop on the bandwagon and enter a franchise opportunity. Visions of instant profits float before your eyes, and you’re ready to pull out your checkbook, pay the franchise fee, and sail into a golden future.
In the mid-19th century, Isaac Singer had an idea on how to market his namesake sewing machine across the nation—and thus the franchise industry was born. The industry, needless to say, has grown exponentially to the point where, in 2020, there were 753,770 franchises in the U.S.
Buying a franchise resale is a popular way to become a business owner in the United States. A franchise resale is buying an existing franchised business that has been owned and operated by a previous franchisee. According to the International Franchise Association (IFA), there were an estimated 780,000 franchise establishments in the U.S. in 2021. A significant number of those are available for resale at any time.
When we hear the word “franchise,” most likely the image of the Golden Arches and McDonald’s comes to mind. McDonald’s truly is one of the most successful franchises, with its presence now spanning the globe and generating billions in sales.
While the website Statista reports 753,770 franchises were operating in the United States in 2020 (with McDonald’s and 7-Eleven ranking one and two revenue-wise), Entrepreneur magazine’s 2022 Franchise 500 Ranking lists Taco Bell and the UPS Store as the best opportunities for new franchisees.
Proposal would reduce fraud in franchising and level the playing field for franchisors and franchisees.
The North American Securities Administrators Association (NASAA) recently released for comment a proposed Statement of Policy on questionnaires and other disclaimers in franchise documents. The deadline for comments is January 5, 2022.
In 2020, according to the website Statista, there were 753,770 franchise establishments in the United States, employing 7.49 million people. Under a franchise agreement, a franchisee can utilize the franchisor’s business model and ideas.
For a prospective franchisee, one of the best ways to learn about a franchise is to talk to current franchisees. Franchisors are required to list current franchisees and franchisees who have recently left the system in the Franchise Disclosure Document. Before purchasing a franchise, a prospective franchisee should contact as many current and former franchisees as possible.
If you are considering buying a franchise, you should beware of boilerplate disclaimers. They come in many forms. Some are buried in the fine print near the back of a thirty-page franchise agreement. Many are duplicated in a separate document back near the receipt in the FDD.
