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Why You Need to Read the Offering Circular

Why You Need to Read the Offering Circular. Item 1 - Franchisor. This section details what company is the franchisor and their history Look for a company that has been in business for at least a year Is the company a one-person operation or large corporation. Item 3 - Litigation.

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Why You Need to Read the Offering Circular

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  1. Why You Need to Read the Offering Circular

  2. Item 1 - Franchisor • This section details what company is the franchisor and their history • Look for a company that has been in business for at least a year • Is the company a one-person operation or large corporation

  3. Item 3 - Litigation • The litigation section lists cases pending against the franchisor. • Watch for numerous suits from franchisees

  4. Items 4-6 • These sections detail initial franchise fee, payments, ongoing fees, and total initial investment • Watch for hidden fees in the agreement • Make sure you’re aware of payment due dates

  5. Item 10 – Financing arrangements • This section details what assistance is available for financing the franchise. • Some franchisors will help finance the contract

  6. Item 11 – Obligations of Franchisor • This section details what you will receive as a franchise. This could include: • Site selection • Management assistance • Training • Software/database access • Merchandising ideas

  7. Item 12 - Territory • This section details whether or not your franchise would get an exclusive territory for operations • Make sure you get exclusive territory to operate

  8. Item 17 – Renewal, Termination • This section details the length of the contract and how it can be renewed or terminated • Watch for long periods (50 years for Putt-Putt) • Make sure you have an ability to get out of the contract if needed

  9. Item 19 – Actual, average, projected sales • This section details averages for sales, profits, or earnings • Illegal to promise earnings, so no actual figures should be provided • Find what percentage of franchisees have had the sales, profits, or income claimed by franchisor

  10. Make sure you read the circular as well as having a lawyer read it over

  11. Process • Self analysis • Choose product/service • Seek likely franchises • Investigate • Other franchisees • Third parties • Franchisor • Have lawyer review • Sign agreement

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