In this economy, many people who are losing jobs they thought were secure are trying to start their own business. There are many opportunities available, but most are out of range for the average persons finances. If you are one of these people searching for the right opportunity, you have probably noticed many ads offering a franchise for sale. BE CAREFUL! Most of these small time franchise deals are just devious plots designed to let the franchiser sit back and collect checks every month while he does next to nothing, and if things don't work out and the business goes under, he takes back everything you thought you owned and leaves you with nothing but a completely ruined life. How do they do it? They use a document called the Franchise Agreement, and it is a completely one sided contract in favor of the franchiser. I'm going to tell you everything I have learned about franchise agreements, and when I'm done you will probably feel that if you ever even see one of these documents, you will run away from it as quickly as possible.

 The franchise agreement is a legal contract between you and the franchiser. Its just that simple, but the terms of the contract are not simple at all. They are overwhelmingly in favor of the franchiser. In fact, according to his agreement, he can do no wrong. Anything bad that happens is your fault. He can not be held responsible. FOR ANYTHING! Its right there in the legal jargon of the document.    

 For example, the agreement will state that he gets final approval of the location for the business. But if the location proves to be absolutely terrible, he takes no responsibility for it. Doesn't matter if he picked the location himself and brought you to it (and they will) its not his fault, its yours.As you read through the agreement, you will see over and over again language protecting the franchiser from every single thing that can possibly go wrong, even though he gets to dictate nearly every aspect of your business.

 So, if you think you are buying a franchise business to be your own boss, better think again. You may be the one paying the money, but you are not the customer. What you are really doing is buying a boss, and that's probably not what you want if you are buying a business. They will tell you what you have to buy and where to buy it. They can come in and inspect every aspect of your business any time they want, even if you are not there. They can make you open your books to check your numbers any time they want, and if they determine the numbers are not right, they can make you pay more. Sounds bad? The worst is yet to come...

In every franchise agreement there will be a section about terminating the agreement. I CAN NOT OVERSTATE HOW IMPORTANT THIS IS! THIS IS THE PART THAT RUINS PEOPLE LIVES!

If your business becomes insolvent and you have to shut down, you will find that everything in the business that you thought you owned, you never really owned, because the franchiser has the right to buy it all back, and YOU HAVE TO SELL IT TO HIM if he wants it. Maybe that doesn't sound so bad if you are dissolving a business, but his terms will allow him to buy it all at literally a fraction of its value. Then, guess what, he gets to sell it to the next sucker that buys a franchise at full value. That's one of the ways these guys make money. Read this section carefully, there might even be terms in there that make you pay fees because of his lose of future revenue since you went out of business or you "improperly terminated" the agreement. Then, when that's all over, you can't even go out and start a new business with the knowledge you have learned because the non compete section states that you can't work in the same kind of business for a certain number of years. So there you are left with no business, a huge pile of debt, and you can't even work in the same business anymore, as the franchiser skips on down the road on his way to find another sucker who is willing to apply for a loan to buy a franchise. What a racket.

You have a problem. A franchise agreement is legal contract and you are bound by its terms, however, there might be hope for you. Franchisers are strictly regulated by state and federal law and the FTC. There are certain things they absolutely must do before you sign an agreement and there even things they are not allowed to say. Here are two tricks these guys like to pull.

1. They will say whatever they think you need to hear to make you feel secure enough to sign the agreement, but they have a line in the contract which states that no verbal agreements have been made, so they can't be held responsible for anything they said. This is illegal, but very hard to prove after you sign an agreement.

2. They don't disclose all the information to the buyer that is required by law. Maybe there is a history of failed franchises they want to hide, or a bad financial statement for the franchisers company. There is a list of information they are required by law to give you, and if some of it is embarrassing and could effect the sale of a franchise, they will try to hide it. If a franchiser deceived you in this manner, you might just have a case against him and be able to fight him. To do that, however, you will need the help of a really good franchise lawyer.......

Whether you are considering buying a franchise or have already bought one and are in a bad situation, I can't stress the importance of this enough. YOU MUST HAVE A LAWYER THAT SPECIALIZES IN FRANCHISE LAW! I mean as a full time occupation. If he is not up to his neck in franchise law every single day, you don't want him. A common mistake people make is they get refereed to an attorney who practices standard business law. This lawyer might say "sure, I can do that for you." ( most of them will ), but the truth is if its not their main area, they just don't know all the little intricate details they need to know to protect you. A franchise law specialist can be hard to find, but they are out there and believe me, you need to take the time to find one.

 Once you have found your lawyer, if you are buying a franchise, you will give him copies of every single thing and he will determine if the franchiser is following the rules of full disclosure. If something is missing, no matter the excuse, I advise not doing business with him. If you are a franchise owner having problems with your franchiser, you need to take the time to write down every single thing you can think of that has happened between you and the franchiser that you think might have some impact on the case you want to build against him. Give this and copies of the franchise agreement and any other documents, copies of e-mails, or anything else that applies to your case, give it to your lawyer ahead of time to review, and then meet with him to determine what options you have. Chances are he will find something that will gain you the upper hand.

 These guys who start up these little franchise schemes all have grand delusions of being the next Starbucks when they start out. After they work at it a few years, most of them find that people are not exactly lining up outside for a chance to buy their brilliant new business concept. In fact many of them don't even do it as a full time job. Its a sideline because they don't have enough units in place to generate an income, lease office space, pay a secretary, accountant, lawyer, and all the other expenses that go with a business, and when they get a failed franchise on their record, of show a bad balance sheet that would make people think twice about their stability, that's when they start hiding things.

 Maybe there are some honest small time franchisers out there. Maybe you found one and you want to roll with it. Just remember, no matter how great a guy he is, the franchise agreement will favor him in every way. You are not buying a business partner. You are buying a boss.