I had been waiting for this since I joined the company earlier this year. After agreeing on the development of a brand new website (to be coming soon), my boss understood the importance of setting up a blog, which of course will be powered by WordPress.

Many of our competitors already have blogs but they mostly use these blogs for SEO purposes. By “SEO purposes”, I mean their main goal is not to get people to read their blogs, but to stuff their posts with links for SEO juice.

I obviously want to use this new blog for SEO purposes as well, but most importantly, I want to provide real franchise news and information to potential franchise buyers. I’ve always been a big believer in the power of blogs but I think I just recently understood how to efficiently use them, after reading “The New Rules of PR & Marketing” by David Meerman Scott.

I know there is a place for us in the franchise blogosphere as there are very few genuine franchise information blogs out there, most of them putting their own interests first vs. putting the interests of their (potential) readers.

However, there are a few good blogs out there: Blue MauMau, the Franchise Pundit, and Franchise Pick to name a few… I subscribe to their RSS feeds and read their latest posts almost on a daily basis.

Last week, one of the blogs I follow (note that I am not linking to it) posted about how one of Guy Kawaski‘s people approached him to help create the new franchise page on AllTop.com. I thought it was pretty cool so I commented the following, adding my name and my company’s URL as it is common practice to do when filling out a comment form:

Congrats on being noticed by Guy’s team! Do you know how I can submit franchise-related content to the alltop?

That was a totally genuine comment. I was truly happy for this blogger that AllTop got in touch with him to put up the franchise section together.

The next few days following this comment I had made, I also posted two additional comments on his blog. These comments were related to choosing the right franchise and buying an existing business.

Today, I went back to the site to read a new post and realized that my 2 previous comments were not there. Hmm. I scrolled down and saw that my comment about AllTop was there with an additional comment so I opened the post to read this follow up comment. This comment was posted by the blogger, telling me I was spamming to get links back to my “weak ass franchise site”.

I picked up the phone and called him as he gives his phone number on his blog (which I think is a great idea). I told him my name and he didn’t seem to connect the dots as he was welcoming me with a warm “Hi Sebastien, how are you?”. Then I told him I was the guy who commented on his blog and that he accused me of spamming. The tone of his voice changed right away and he went on telling me he gets many spam comments every day and that I was just commenting to get a link back.

I was really hurt that this guy labeled me as a spammer. I tried to explain to him that I don’t care about his link back for several reasons.

1. It’s a TyPad blog (I hate those). When you post a comment, your link doesn’t even show up as it does on WordPress with the nofollow tag. Instead, the URL showing is a redirect from TypePad to my site. So if you put your mouse over my name, you will not see http://www.worldfranchising.com as the URL, but you will see something like http://www.typepad.com/t/comments?__mode=red&user_id=2125124&id=132339572. While Google supposedly pays no attention to nofollow URLs, it has been demonstrated in the past that Google actually use these for “discovery”, aka, finding new pages. However, I have nothing to gain by having a redirect such as the one mentionned above to my site. The only benefit would be that someone may click on my name and go to my site, which brings me to point #2.
2. This blog is never commented on which could mean several things: a) it gets no traffic. I really doubt it though as it ranks pretty well for some key keywords. b) there is traffic but traffic leaves the site right away, which is likely to happen as people come here looking for franchise info and most likely don’t find what they want. c) comments are deleted by the blogger himself as they come, in which case, why don’t you turn off the commenting feature?
3. Understanding the 2 points above, why would I waste my time commenting on his blog, other for the genuine purpose of commenting and creating a conversation on some of his interesting posts? That’s the question.

I tried to convince him that I wasn’t spamming him, told him about the other comments that were meant to show a different point of view (ie. he was saying you have to love a franchise to buy it. I was saying that it’s true, however some businessmen buy franchises without giving a shit about the product. These are the true business people who are not involved in the day to day operation but they are highly involved in creating a business vs. operating it). On the other comment, I was trying to get the blogger’s opinion as he pointed out to an interesting article that basically said that it is safer to buy an exisiting business. I asked the blogger what he thought about it. After all, I come to his blog to get his opinion, not the one of a newspaper article…

My attempt to convince him of my good faith was vain. He still thinks I am a spammer and that I do this to get links back to my “weak ass franchise site”. This was very insulting too. I asked him if he knew my boss. He said he didn’t. Very strange, as everyone in this industry knows Rob.

During our phone conversation he mentioned he had relationships with other franchise directories (our competition), which I think was the real reason for not adding my comments. He just doesn’t want people to potentially leave his site to go to mine.

I asked him to at least kindly remove my comment and his comment about me being a spammer, which he agreed to. He didn’t have to but I think it’s fair. I just checked the post again and he just removed his comment about me spamming his blog. He left my comment on and I can appreciate that.

The moral of this story is that if you have a blog, you will always expose yourself to spamming. I get a lot of spam every day (especially on the iPhone Download Blog – which by the way reached over 8,000 people yesterday!) and if it is too flagrant that it is spam (like “I love your blog, thank you so much”), I simply delete the comment and mark it as spam. If the comment is somewhat genuine and the URL is the one of a personal blog, I approve it. If the comment is somewhat genuine and shows the URL of a foreign currency exchange type-of-website, I just edit the comment and remove the link. Doing this, I don’t give the SEO juice to the spammer but I keep the community feel of my blog alive. Because that’s what blogging is all about: telling what you think and also being able to hear what others are thinking.

1) Evaluate your interests, skills and financial situation. Consider your interests and skills before you buy a retail franchise. What about owning a retail franchise appeals to you? Are you willing to work long hours – evenings, weekends, and holidays? Make sure you understand your financial situation; it could help you narrow down your options to what you can afford.

2) Check out opportunities. Have you narrowed your options down to those that match your skills set, interest and budget? Ask to see the franchisor’s Uniform Franchise Offering Circular (UFOC) and financial statements. Ask existing and former franchisees whether or not they are satisfied with their earnings and the franchisor’s performance and support.

3) Research your market. Do you want to open up a golf retail store in your community? Does the market support this decision? If you live in a small town with freezing winters and no golf courses, think again: the presence of a demand for your product or service is essential to franchise success.

4) Location, location, location. The location you choose is critical. For example, if you settle down in an infrequently traveled area far from complimentary business or tucked away at the back of a strip mall, you severely limit your earning potential. The truth is that not all retail stores work in a mall setting, contrary to popular opinion. Always gauge the likelihood of outsiders visiting your store prior to choosing a location.

5) Once you choose a franchise, secure financing. When it comes to financing, there are numerous options, including bank loans, home equity loans and SBA guaranteed loans. Moreover, some franchisors offer in-house financing. Alternatively, you may not need to borrow money for less expensive franchises, such as home-based businesses, and some franchisees charge the fee on a credit card.

6) Attend training and hire staff. You will need training and an operating manual in order to run your business. Generally, franchisors provide training. You may or may not need to hire a staff, depending on your franchise concept. Prior to your opening, you will want to post signs and run an ad advertising openings.

7) Obtain the necessary permits and insurance. You might be required to apply for several federal, state and county licenses and permits. Requirements for insurance vary according to industry. Take a look at the Franchise Agreement for more information.

Consider asking the following ten questions:

1) Is it a “package franchise” or a “product franchise”? The majority of franchises are “package franchises” – businesses such as fast-food restaurants, muffler shops or motels that come complete with a laid-out business model covering everything from financial controls to hiring guidelines. “Product franchises,” on the other hand, include businesses such as car dealerships and gas stations that exist primarily to distribute the parent company’s goods. Understandably, product franchise owners have more control over how they run their businesses than package franchise owners.

2) Does the business lend itself to the franchise model? For example: fast-food businesses greatly benefit from their associations with the brand name and products of the franchisor. Don’t take it for granted that this holds true for another kind of business, such as, for example, a car wash.

3) Take a look at the offering circular: What does it say? According to the Federal Trade Commission, franchisors are required to provide prospective franchisees with an offering circular that contains basic facts about the company. Be sure to read the UFOC document; it contains invaluable information about the firm’s legal history, business experience and other franchisees.

4) What is the number of franchisees in the organization? The more franchisees there are, the more successful and established the business is. Be aware, however, that if a firm’s other franchises are located near yours, you could end up competing with a nearly identical business.

5) What’s the franchise fee? According to the International Franchise Association, 95 percent of franchise fees were less than $40,000 as of 1996. However, you could end up paying more for a franchise affiliated with a blue-chip national chain.

6) How much will you end up paying in royalties? Generally, franchisors charge royalties equal to 3-6 percent of each franchise’s revenues. However, some firms charge much more, and still others charge flat fees on an ongoing basis.

7) How much money will your business bring in? Usually, the parent company’s projections are optimistic. Franchisees may have different opinions, however – the UFOC will tell you how to get in contact with them.

8) Are these people you can work with? Franchising is a long-haul kind of commitment, and quite expensive, too – so you’d better get along with your bosses. Visit the company’s home office, regardless of how far from you it is, and ask other franchisees about their experiences with the parent company.

9) How is the franchisor going to help you? A franchisor may negotiate a lease, select a site for your business, advertise for / interview prospective employees, finance the franchisee fee or equipment costs, get business licenses, or provide other services. What will your franchisor do for you? Get it in writing.

10) How legitimate is the franchise company? Occasionally, franchisors will try to bilk new entrepreneurs. Look to other franchisees, the FTC, and the Better Business Bureau to determine just how legitimate your franchise company is.

The proof is in the details:

1) The bill reinforces existing prohibitions. The SBFA is a reminder that perpetuating fraud within the franchisor-franchisee relationship is prohibited.

2) The bill mandates good behavior and faith. Unsurprisingly, not everyone follows the rules in the world of franchising. The SBFA looks out for small franchisees by requiring all parties to act honestly with each other and observe reasonable standards of fair dealing in the industry.

3) The bill encourages franchisees to form trade associations. The SBFA clearly states that corporations cannot prevent franchisees from creating or joining trade associations. (As a matter of fact, membership in professional organizations is beneficial, and can enhance one’s knowledge of the franchising world).

4) The bill protects the franchise from unjust termination. A compulsory 30-day period must be given to the franchisee to cure any defaults, among other allowances.

5) The bill promotes free trade post franchise agreement expiration. Upon franchise agreement expiration, a former franchisee is allowed to engage in business anywhere but is prohibited from using the franchisor’s trademark, intellectual property, or trade secrets.

6) The bill protects franchisees against unlawful transfer of the business. Franchisees are particularly vulnerable to unlawful transfers due to the prevalence of mergers, leveraged buyouts and acquisitions. According to the SBFA, franchisees must be given 30 day’s notice of the franchisor’s transfer of ownership to another entity.

7) The bill gives a state attorney general permission to step in if necessary. Should a state attorney general believe that the interests of the state have been or are being adversely affected or threatened due to franchisor activities that violate the SBFA, the attorney general is allowed to bring a civil action on behalf of its residents in a U.S. District Court. In other words, the highest prosecutorial officer of the state can make sure that the SBFA is not being violated.

8) The bill allows franchisees the freedom to independently source goods and services. Rather than forcing franchisees to purchase materials from corporate headquarters at what can be an exorbitant price, the SBFA allows franchisees to purchase goods and services from sources of their own choosing (given that those materials meet reasonable, established and uniform system-wide quality standards dictated by the franchisor).

9) The bill imposes limited fiduciary duty on the franchisor. When handling the small businessperson’s money, the franchisor must provide its franchisees with the highest standard of care. Franchisors are obligated by the SBFA to give franchisees a full disclosure of disbursements and a full accounting of how the money is being used.

10) The bill enforces procedural fairness. It is unlawful for a franchisor to require any term/condition in the franchise agreement that violates the SBFA. This is very important, as it disallows a franchisor from restricting any benefits inherent in the SBFA.

While there are multiple websites and books floating around that outline the steps that ought to be taken in the interests of due diligence, you should take a minute to review the “red flags” we’ve outlined below:

1) Is the franchise salesperson putting on the pressure? One of the traits of a good franchisor is that it wants to make sure there is a mutually good fit before “closing the sale.” Should you find yourself being pressured into making a decision but feel like you haven’t been given adequate time to think everything through, don’t sign an agreement. Frankly, the franchisor wouldn’t be hounding you like that if the franchise opportunity were, in fact, spectacular or if there were, in fact, a long line of potential franchisees. What’s more likely in a pressure situation is that the franchise opportunity is not that spectacular, their line is not that long, and, conversely, they need your money in order to make their payroll.

2) Do the salesperson’s explanations not match up with what’s in the UFOC? Is the salesperson making promises and/or commitments above and beyond what’s written in the Uniform Franchise Offering Circular (UFOC)? If so, you should have the contract amended to include those promises. Remember: always get it in writing.

3) Has the franchise salesperson not followed through? Sometimes franchisors lead prospective franchisees through a bunch of hoops so they can better predict how the prospective will respond as franchisees. Just make sure that the franchisor keeps his word during this “courtship” period – if he doesn’t, you’d be wise to not jump into marriage!

4) What do existing and former franchisees have to say? There’s no better way to find out whether a franchisor has lived up to its promises and provided leadership to its franchise network than by conversing with current and former franchisees. Keep in mind that, while there are always those disgruntled franchisees that had unrealistic expectations to begin with, a large number of complaints among a set of franchisees signals a definite red flag.

5) Is there a history of litigation? Litigation is not, by definition, a bad thing – for instance, a good franchisor is willing to litigate in order to protect the brand in question. And there will always be a contingent of disgruntled franchisees that will blame the franchisor for their own shortcomings. However, excessive litigation is certainly a sign of trouble; if this is the case, dig deeper.

6) Are you uncomfortable with the level of training and support provided by the franchisor? Consider the length and composition of the program (all lecture or some hands-on experience?), the subjects to be covered, and the qualifications of the training instructors. If you’re not sure whether or not you’ll learn what you need to know to operate the business, look into the issue. Current franchisees are a good source of information: Did they learn enough via training to operate effectively? Did they get needed help on an on-going basis from a qualified support staff? Are you confident that the support outlined in the agreement can effectively assist you in managing your business?

7) Is the franchisor’s financial stability questionable? You should have a franchisor’s UFOC reviewed by a professional. While most franchisors have the best of intentions when they promise support, what matters is that they are able to ultimately provide the support you need.

The following are tips designed to help you get through franchisor bankruptcy:

- Heed warning signs: Hear a rumor? Investigate it. You do not want to find out the hard way – i.e., through a third party like a customer or the paper – that the franchisor is bankrupt, since doing so can compromise your rights and interests. If someone murmurs “bankruptcy,” be on the alert. The worst case scenario is that you determine that the rumor is no more than a rumor, and business resumes as usual. Some signs are very subtle, so pay attention. For example, if your franchisor is collecting advertising money from you but you don’t see any advertising happening, be on guard.

- Have a crisis communication plan: Make sure you have a public relations campaign that includes a crisis communication strategy – preferably, a strategy that includes several contingencies. For instance, if your franchisor goes bankrupt, the media and customers will be wondering if the business is in jeopardy. You want to be able to craft a quick response.

- Be sure to stay in touch with the local media: True, newspapers and media generally go straight to corporate headquarters for information – but don’t let that deter you from establishing your own relationships with writers, reporters, producers, and news directors. This way, you’ll be in a better position to field inquiries should disaster strike.

- Keep a list of alternative suppliers: Occasionally the initial problems occur with suppliers who may be nervous about getting paid. Moreover, if the franchisor can’t provide supplies, a franchise must look elsewhere. Develop a list of viable and trustworthy suppliers to prepare for a possible distributer catastrophe situation.

- Maintain a stash of supplies: Your franchisor declaring bankruptcy could very well leave you with an inadequate amount of supplies. By keeping a surplus of items you may need, you can avoid this scenario.

- Ensure that the community is aware that you’re independently owned: While you don’t necessarily need to regularly remind your customers that you’re independently owned, you do need to establish your business as a separate entity from all the other franchises. This can be accomplished by either letting fellow business owners know or becoming involved in the community. You want your business to feel as “local” as possible, because customers tend to favor locally owned businesses over nationally owned ones.

- Get the support of fellow franchisees: Moral support from your colleagues – even if they’re also your competitors – never hurts. In fact, helping out your fellow franchisees in times of need could ultimately mean the difference between success and failure. If the distance between you and other franchisees isn’t too great, you may be able to share supplies, which would help everyone.

- Consult a lawyer specializing in franchising: Consulting an attorney who has expertise in franchising could end up being invaluable in the case that your franchisor goes bankrupt. The time and money you put into hiring an expert is, simply stated, an investment in your future. A lawyer can educate you about your rights and help you concoct the right business plan for your business. You owe yourself this and more as a business owner.

The ways in which you can locate and purchase franchises include:

Directly Through the Franchisor: As a general rule, franchisors list information on their websites or will send you an information packet per request.

Internet: When it comes to online franchise directories, there are nearly too many to count. Many of these lead generation sites offer additional features, including advice on franchising, franchise law, and financing. Be aware, though, that, due to the sheer volume of available information, you may have difficulty deciding where to begin your search for the ideal franchise opportunity.

Franchise Brokers and Consultants: Generally, brokers and consultants represent a select group of franchise companies; they often have a set criteria or code of ethics they require of the franchisors in their database. Several charge a fee to franchisees for their services, and others receive compensation from the franchisor once the deal is set. On the downside, your search for the perfect franchise might be limited to a broker’s or consultant’s database of approved franchise companies. On the upside, franchise brokers and consultants know the companies they represent very well, considering that they meet executives face-to-face, meet with existing franchisees of those companies and review Uniform Franchise Offering Circulars (UFOCs) and franchise offerings.

Trade Shows: Throughout the year, you’re guaranteed to find a multitude of franchise trade shows you can attend. Such shows provide a great opportunity to find out about lots of different opportunities you may have been previously unaware of and, similarly, to research companies that you are interested in. Franchisor representatives generally attend these shows, thus allowing you a unique opportunity to glean an accurate assessment of whatever company you might be interested in.

Newspapers: While the classified section of your local newspaper may list available franchise opportunities, the majority of established franchise companies do not advertise in newspapers – which means it would be in your best interest not to limit your franchise search to newspapers alone.

Trade Publications: Prospective franchisees, spotlight opportunities, and list advertisements from franchisors are all targeted by trade publications such as print magazines, newsletters, and/or online journals and Web sites.

A final thought: franchise reselling is something you should be aware of when searching for a franchise opportunity. It’s possible that an existing franchisee wants out of an agreement, or, a franchisor may be reselling a franchise because that franchise has gone belly up. Whatever your suspicions may be, try to track down the original franchisee to find out exactly what happened, because the opportunities you’re checking out may in fact be legitimate – for example, a franchisee may have wanted out solely due to personal reasons completely unrelated to the performance of the business in question. Be sure to do your due diligence by thoroughly investigating the opportunity of interest (that is, verifying its legitimacy with the franchise company) and retaining a franchise attorney to protect your rights and interests.

There are three basic parts in a UFOC:
1) 23 sections that describe the aspects of the franchise program.
2) A set of the franchisor’s audited financial statements.
3) A copy of every form or contract you will sign if you decide to purchase the contract.

The rule requires companies to include a list of the names, addresses, and telephone numbers of at least 10 recent purchasers geographically closest to a potential franchisee in their disclosures – this way, the franchisee can obtain legitimate references. Once you have this information, you will be able to contact recent purchasers and ask them questions regarding the financial performance of the franchise you are looking into.

Be aware that the FTC does not require that disclosure statements be filed. While franchisors do provide information to potential purchasers, they are not required to file that information with the FTC. It is possible, then, that only a potential purchaser would be able to obtain detailed information about a particular franchise. However, even if you are unable to glean information from the FTC because you are not a potential purchaser of a franchise, it may still be possible to find the information you’re seeking if that franchisor has filed a UFOC. Fifteen states require franchisors to provide presale disclosures, and most of these states do not provide copies of these disclosures but permit review of the documents in person by appointment.

These states are:
California (filing required)
Hawaii (filing required)
Illinois (filing required)
Indiana (filing required)
Maryland (filing required)
Michigan (only notice required)
Minnesota (filing required)
New York (filing required)
North Dakota (filing required)
Oregon (UFOC filing not required)
Rhode Island (filing required)
South Dakota (filing required)
Virginia (filing required)
Washington (filing required)
Wisconsin (filing required)

The UFOC / FDD document consists of 23 different categories, which contain information such as basic investment, franchise fees, a financial statement of the franchisor and earnings claims (if the company discloses that information), how long the franchise will be in effect, bankruptcy and litigation history (including civil judgments and felony convictions) and information about the franchisor’s executives (such as past experience).

There are fourteen “Registration States” that require franchise companies to file or register their franchise offerings with a state agency. These states are: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. These states (and Oregon) additionally have disclosure regulations similar to FTC regulations.

Several other states regulate the offering and sale of “business opportunities” via state business opportunity laws. Arkansas, California, Illinois, Iowa, Minnesota and a few other states regulate the termination of non-renewals of agreements. In California, Illinois, Indiana and Maryland, proposed ads must be pre-approved prior to publication.

As you may very well be aware, the government regulates all businesses, not just franchises. Regardless of what business you’re going into, you’ll have to find out what licenses and/or permits are required before you open that business. Such licenses/permits include a business license from your city’s business license department; a fire department license (if your business uses flammable materials); air and water pollution control permits if you burn any materials, expel anything into sewers or waterways, or use products that emit gas; state licenses for certain occupations like auto mechanics, realtors, barbers and cosmetologists and educations ; a sign permit from your city or county; sales tax licenses from your state department and health department permits.