It is a wise move for those who want to buy a business franchise to avail of the services of a competent franchise attorney and a financial adviser. But even prior to seeking such services, prospective franchise buyers should already be knowledgeable on the basics that are involved in operating franchised outlets. Many of these fundamentals are covered by information covering some frequently asked questions on franchises for sale. Among these FAQs are:

Q. Where can franchise opportunities be found?

A.  Franchises are advertised in many ways. There are franchise directories which can be accessed on the Internet. Others can be found in traditional magazines and publications on franchising. Through these listings, prospective franchisees can initially gauge the business that is best suited to their talents, skills, or abilities.

Q. What is the Franchise Disclosure Document (FDD) and why is it important?

A.  The FDD enables a prospective franchisee to analyze the franchise and the franchisor. It is a legal document that the Federal Trade Commission (FTC) requires the franchisor to furnish to franchisees. This document must be furnished to the franchisee applicant at least 10 days before the franchise agreement is signed.

Q. What government agencies, besides the FTC, regulate the franchising business?

A.  Although franchises’ offerings and sales are generally regulated by the FTC, 14 state governments also regulate franchising in areas under their jurisdictions. Additional franchise regulations and oversight are sometimes imposed in these 14 states in order to extend an extra protection layer to prospective franchisees. These states areCalifornia,Illinois,Indiana,Maryland,Michigan,Minnesota,New York,North Dakota,South Dakota,Oregon,Rhode Island,Virginia,Washington,Wisconsin, andHawaii.

Q. Can prospective franchisees ask about potential earnings from franchisors?

A.  Information on how much money a franchisee can potentially earn may be found in the FDD. Franchisors’ disclosure about franchisees’ sales or earnings is not allowed unless that information is provided via the FDD. It’s been estimated that this information is provided in about 25% of the franchisors’ FDDs.

Q. Can this information on potential earnings be sourced elsewhere?

A.  Current franchisees are the best source for this information. Although detailed information may not be provided, what they can provide are ranges of sales or earnings that a franchise applicant can use as a basis to work with. These data are useful in financial projections at varying sales levels.

Q. Can financing offers be expected from franchisors?

A.  The possibility of receiving a financing offer from most franchisors is remote. The best thing that they can do is arrange for third-party financing.