The Franchisee Opportunity For Starting a Small Business

A good portion of the chains in the market are franchises. The individual who first conceives the idea for a business gets it going, generally as a limited company, and provides licenses, for a fee, to others who desire to run their own branches along the same business model. The franchisee purchases the legal authority to

utilize the company name and logo and to deal in the company's products or services. The franchisor, the person who came up with the original idea, provides a contract which enumerates the various operational details, gives suggestions regarding conducting the business and sets out the percentage of the receipts which he expects to be paid. This manner of conducting a business may be seen as advantageous since another person has already laid the path to success, but such an arrangement may ultimately be restrictive as it also tends to limit one's creativity and one's ability to mold the business to suit one's individuality. One may seek out additional information from the SBA or the FTC.

The Federal Trade Commission is a self-governing body which was established by the federal government to ensure that franchisees are not exploited by ruthless franchisors in this industry. The FTC performs an extremely significant function in insuring the smooth operation of the sector while also being responsible for uncovering

fraud and malpractice. Primarily, the FTC mandates that each franchisor provides all significant business statistics which will have an effect upon the decision that a franchisee must make.

Such information must be provided to the potential franchisee ten days prior to the execution of any contract. This stipulation gives the franchisee sufficient opportunity to assess the franchisor. Further, it is mandated that the franchisor give the potential purchaser the names of several of its existing franchisees in order that he may contact them. In addition, the franchisor must disclose the circumstances of any legal proceedings in which it is or has been named as defendant.

The Federal Trade Commission also strictly regulates earnings claims. Many unscrupulous businesses use large rate of return statements to entice naive franchisee candidates. Therefore, under the FTC regulations, a franchisor that makes an earnings representation must have impeccable records to substantiate the claim.

Any contradiction between the disclosure statement and other written or verbal promises issued by the franchisor is prohibited.

Another edict of the FTC is that the affiliation between franchisee and franchisor differs from situation to situation. One must remember however, that the Federal Trade Commission is not empowered to prosecute unscrupulous franchisors, but it can file lawsuits to enforce its rules. By using the court system, the FTC can bring its

influence to bear against the company and its officers in order to assist a franchisee in recapturing his investment. The Act establishing the Federal Trade Commission is not enforceable by private law.

JT Philips is a developer, investor and engineer and has been writing articles for years. Find the latest info on Talalay Latex Mattresses and on MemoryFoamMattressPads for your sleeping needs.

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The Franchisee Opportunity For Starting a Small Business