• Franchises are not guaranteed to make money. Even if you own a business which is part of the most successful franchise in the country or the world, your store may lose money, especially in the beginning. Be prepared to deal with this type of situation.

   

• A franchise is a long-term investment. You will not get rich quick. It may take you several years to develop your business to a point where you have paid off any loans and are making the amount of money you anticipated. If your business does not make money or you tire of it, you cannot simply close up shop and forget about it. Like it or not, you must continue to work for the full amount of time agreed to in your contract.

   

• Franchisees cannot under any circumstances deviate from the norm. You will be told exactly how to run your business, right down to how to organize your finance books or where to keep the napkins. Even if you believe that the franchisor’s decision is not the best one for your particular store or regional location, you will be required to follow the rules. If you are a natural entrepreneur who has a creative mind and wants to operate your business your own way, franchising is probably not for you.

   

• A franchise requires a very large amount of money. The startup fees may number in the hundreds of thousands of dollars. Make sure you and your family can afford to sustain this kind of loss, should your business fail. There will also be continuous fees for royalties and advertising which will continue for as long as you own the business. They may be quite high and you may not want to pay them after learning the business and doing all the work, but you will be bound to continue to pay them as part of your contract.

   

• You are not guaranteed the right to alternate vending of inventory, product, service or supplies beyond those that are disclosed in the UFOC. The franchisor may require you to buy everything you need from an approved vendor or group of vendors. Often, these vendors charge more than independent vendors because they give the franchisor a part of the earnings. Even if you know that you could buy the same items elsewhere for significantly less money, you may be required to use only the vendors accepted by the franchisor. Also, find out what factors could affect the franchisee’s ability in the future to obtain essential goods economically from a reliable source.

   

• The franchisor may be bought out or may go out of business. If the franchisor sells to or merges with a company that does not understand franchising or if it has different goals that allow the system to deteriorate, you may suffer.

Source: New york State Attorney General