Buying into a franchise has a number of advantages over building your own business from the ground up. Franchises can offer you a proven business model, established brand recognition and various types of support from the franchisor. These benefits often come at a price, however. As the franchisee, you’re trading away some level of autonomy in how you operate your business.
The Franchise Disclosure Document
The Federal Trade Commission requires franchisors to make certain disclosures to prospective franchisees before investing. The Franchise Disclosure Document, or FDD, contains all the information you’ll need to make an informed decision on whether to invest. Examples include financial projections, pending litigation, company leadership profiles and the franchisor’s expectations of and restrictions on franchisee operations. When reviewing an FDD, pay special attention to item 9: “Franchisee’s Obligations.” This is where you’ll find out just what rules you’ll be expected to follow.
Read More: Franchise Termination Laws
Their Company, Their Rules
The degree to which a franchisor chooses to mandate your policies and procedures can vary, but some level of compliance is non-negotiable. After you have signed the franchise agreement, you’re legally bound to follow all the rules it contains. Those rules are in place because successful franchising depends on duplicating a proven system and the franchisor doesn’t want you to “fix” what isn’t broken. Failure to adhere to the franchisor’s rules can risk not only your success, but the integrity and value of the franchise brand. Your franchise license can be revoked if you don’t follow them.
You Have Some Control
Although the franchise agreement spells out the rules and policies you have to follow, some areas still may be left to your discretion. The franchisor may dictate your hours of operation, dress code and product pricing, for example, but may leave areas such as human resources or training policies completely up to you. Differences in state laws also can affect which policies an interstate franchise can require you to follow -- what may be legal in one state might not be in another.
Taking Work Home
Franchise rules can extend into your personal life to some degree as well. In addition to putting up capital and franchise fees, you may also be expected to directly participate in the business in a “hands-on” manner. Some franchises will allow you to passively own the business and hire others to manage it, but others will not.
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