Do Your Homework Before You Put On Your Apron !!!
Factors to Consider When Choosing a Franchise
6] Regulatory Body Factors
In this final section, here are some regulatory or compliance factors to consider with respect to your franchise.
a) Business Bureaus and Chambers – Talk to your local Better Business Bureau (BBB) or Chamber of Commerce organization in the location where you intend to open your franchise and also in the location where the franchisor is domiciled. Find out if they are part of those organizations, to begin with. Find out if there had been any complaints against them in the past.
b) Government – Depending on which country you live in, some countries may have rules and regulations to govern the sale of franchises. The franchisor has to prepare and file a document called the Franchise Disclosure Document or FDD. The FDD will contain among other items, a set of financial statements; franchisor’s certificate; licensing or permit information; business profile information and much more.
There may be other regulatory bodies such as a Competition Commission, Trade Commission or Business Ombudsman that exist in your state or province. The purpose of these regulatory bodies is to prevent the occurrence of fraudulent business practices and to ensure that franchise deals are conducted in a respectable, transparent and fair manner. Try to familiarize yourself with your responsibilities towards these regulatory bodies, if any. Also enquire from these entities about the franchisor’s history and track record.
c) Stock Exchange or Securities Commission – If the franchisor is listed on your local stock exchange, they would have to comply with the regulations of the stock market. Check with the local securities market commission if there are any publicly available reports for your franchisor and enquire about their history of their listing on the stock exchange.
