Comments on: Beware Of “Experts” Who Trash Franchising While Selling You Their Business Opportunity http://www.howtobuyafranchise.com/beware-of-experts-who-trash-franchising-while-selling-you-their-business-opportunity/ Free ideas, tips, tools and tutorials to help you evaluate and buy a franchise successfully. From Dr. John P. Hayes Wed, 19 May 2010 16:19:19 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Carol Cross http://www.howtobuyafranchise.com/beware-of-experts-who-trash-franchising-while-selling-you-their-business-opportunity/comment-page-1/#comment-169 Carol Cross Tue, 21 Jul 2009 21:12:26 +0000 http://www.howtobuyafranchise.com/?p=551#comment-169 I agree! Most of the articles written about franchising and the disadvantages and advantages and risks, etc. are written by someone who makes their living in or around franchising or who actually sells franchises. Buying a NEW franchise in a mature system or a buying an already franchised business in a mature system presents problems in a recession. I think buying the already-franchised business is the better choice in the recession because you don't have to buy the business without seeing the actual P&L statements and the business tax return of the seller of the franchised business. When you buy a NEW franchise you really can't determine the odds of failure or success of the system or possibile profitability because the franchisor doesn't have to disclose any unit historical financial performance statistics to new buyers. Item 20 of the FDD really isn't an adequate source upon which to do your due diligence and really is just an artifice to protect the franchisor, himself, from disclosing ANY information about the unit performance within the system. This lack of disclosure protects the franchisor in arbitration and the courts against any claims of fraudulent inducement/concealment in the sale of the franchise. Isn't this true? Why don't more insiders in franchising disclose the Moral Hazard of Ineffective Regulation and how it is manifested in franchising for both the franchisor and the franchisee? I agree! Most of the articles written about franchising and the disadvantages and advantages and risks, etc. are written by someone who makes their living in or around franchising or who actually sells franchises.

Buying a NEW franchise in a mature system or a buying an already franchised business in a mature system presents problems in a recession. I think buying the already-franchised business is the better choice in the recession because you don’t have to buy the business without seeing the actual P&L statements and the business tax return of the seller of the franchised business.

When you buy a NEW franchise you really can’t determine the odds of failure or success of the system or possibile profitability because the franchisor doesn’t have to disclose any unit historical financial performance statistics to new buyers.

Item 20 of the FDD really isn’t an adequate source upon which to do your due diligence and really is just an artifice to protect the franchisor, himself, from disclosing ANY information about the unit performance within the system. This lack of disclosure protects the franchisor in arbitration and the courts against any claims of fraudulent inducement/concealment in the sale of the franchise.

Isn’t this true? Why don’t more insiders in franchising disclose the Moral Hazard of Ineffective Regulation and how it is manifested in franchising for both the franchisor and the franchisee?

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