Listen for things like planes, trains and automobiles as you wander the neighbourhood. Living near places that frequently generate loud noises is probably not a good idea if you have a low tolerance for such sounds.

You should consider the condition of nearby houses as well. A neighbourhood may not be in good shape if many homes are on the market and the fences, yards, and windows all look neglected. Conducting a daytime and nighttime exploration, as well as weekday and weekend visits, are all recommended.

Talking to locals can be an excellent strategy for gaining insight into a community. Keep your eyes peeled for possible encounters with your future neighbours so you can introduce yourself.

Inquire whether they recommend the area to you and your loved ones. There are several factors to consider before purchasing a home, but one of the most important is the local crime rate.

Although there is usually some level of criminal activity in every area, some places are considerably safer than others. In addition, you can get in touch with the local police for further assistance in finding this information, such as the Toronto neighbourhood crime maps , which show the number of crimes per 10, residents.

Considering property value trends is not crucial if you are a renter, but it is essential if you are considering purchasing a home. Before you buy there, you need to know if home prices in the area are rising, stagnant, or falling.

Knowing these tendencies is helpful. However, they are essential to investigate when learning about a community, especially if you plan to make a long-term investment there.

The commute you endure every day can significantly affect your happiness. In addition, the best time to test your commute is when you would typically be on your way to or from work. Their expertise and experience in local communities mean they can share insights that you may not be able to find on your own.

Syracuse St. Explore the Neighbourhood Before You Buy. Choosing a Neighbourhood: Journey of Discovery To determine whether the area is ideal for you, it is best to pay multiple visits. Reach Out to The Neighbours Talking to locals can be an excellent strategy for gaining insight into a community.

Check The Prevalence of Crime in a Given Area There are several factors to consider before purchasing a home, but one of the most important is the local crime rate.

Examine Recent Changes in Property Values Considering property value trends is not crucial if you are a renter, but it is essential if you are considering purchasing a home. You have the right to ask for — and get — a copy of the FDD once the franchisor has received your application and agreed to consider it.

The franchisor may give you a copy of its FDD on paper, via email, through a web page or on a disc. The cover of the FDD must provide information about the available formats. Make sure you have a copy of the FDD in a format that is convenient for you, and keep a copy for reference.

Here are some key sections of the FDD:. Item 1 tells you how long the franchisor has been in business and its likely competition. It also lets you know if there any legal requirements unique to the franchised business, like a requirement that you get a special license or permit.

This will help you understand the costs and risks you will take on if you purchase and operate the franchise. Item 2 identifies the executives of the franchise system and describes their experience. Item 3 lists important information about prior litigation — whether the franchisor or any of its executive officers have been convicted of felonies involving fraud, violations of franchise law, or unfair or deceptive practices law, or are subject to any state or federal injunctions involving similar misconduct.

This item will tell you whether the franchisor or any of its executives have been held liable for — or settled civil actions involving — the franchise relationship.

If there have been many claims against the franchisor, it may mean the franchisor has not performed according to its agreements. Or it could show that franchisees are dissatisfied with its performance. Item 3 also should say whether the franchisor has sued any of its franchisees during the last year.

That disclosure may indicate common types of problems in the franchise system. Item 4 discloses whether the franchisor or its predecessor, affiliates or any of its executives have been involved in a recent bankruptcy. Consider having an accountant review the required financial statements too.

These items describe some of the costs involved in starting and operating a franchise, including deposits or franchise fees that may be non-refundable, and costs for initial inventory, signs, equipment, leases or rentals.

It also explains ongoing costs, like royalties and advertising fees. In addition, ask or find out about:. It may take several months to start your business, and it may take more than a year to break even. Some franchises never break even. Estimate your operating expenses for the first year and your personal living expenses for up to two years.

Compare your cost estimates for the franchise with what other franchisees in this system and competing systems have paid. An accountant can help you evaluate this information. You may be able to do better with another franchisor.

These kinds of restrictions may limit your ability to exercise your own business judgment in operating your outlet. If the franchisor does not limit the territory where each franchisee can sell, the franchisor and other franchisees may compete with you for the same customers by establishing their own outlets or selling through the internet, catalogs or telemarketing.

Talk to the franchisor and current franchisees to get answers to your questions. Franchisees are often required to contribute a percentage of their sales to one or more national, regional or local advertising funds.

Ask the franchisor what advertising it has done and what is being planned. Ask whether franchisees have any control over how advertising dollars are spent, and if all franchisees and company outlets contribute equally to the advertising funds. Find out if the franchisor gets a commission or rebate when it places ads.

If there is a rebate, who benefits — you or the franchisor? If they buy their own advertising, do they get a rebate or discount on their advertising contribution? New franchisees typically count on the franchisor to provide all the business and operational training needed to run a successful franchise.

Check Item 11 for information about:. Be sure to talk with recent franchisees about the quality of training the franchisor provides. Item 17 covers important topics. First, it states whether you can renew your franchise at the end of the term, and, if you can renew:. Item 17 also explains what your obligations would be to the franchisor after termination.

For example, after termination, restrictions in the contract typically will stop you from operating a business that would compete with your prior franchise, if the new business is within a specified distance of your prior outlet. The restrictions may also prevent you from operating a new business within a specified distance of any other outlets of the franchise.

The restrictions may last as long as three years. Lastly, it states whether you have the right to go to court if you have a dispute with the franchisor, or must use arbitration instead.

Item 19 contains claims the franchisor chooses to make about the sales or earnings of its franchises for which there is a reasonable factual basis.

Any claims the franchisor makes about sales, income or profits must be in Item There are two exceptions to this:. For tips on how to evaluate this information, see Evaluating Potential Earnings. Visit or phone as many of them as possible to chat about their experiences.

Some franchisors may give you a separate reference list of franchisees to contact. To ensure you get the full picture, you may want to contact a number of franchisees listed in the disclosure document and some on the separate list. Talk to several franchisees who have been in business just over one year.

Prior owners can tell you:. Some franchisors may buy back failed outlets and list them as company-owned outlets.

The franchisor must tell you who owned and operated the outlet for the last five years. Contact as many of the previous owners as possible to learn about their experience operating the outlet that failed.

Franchisors are required to list in the FDD the associations they sponsor or endorse and independent associations that ask to be listed. You may want to ask members of a franchisee association about:. Investing in a financially unstable franchisor is a significant risk; the franchisor may go out of business or into bankruptcy after you have invested your money.

An accountant can help you understand whether the franchisor:. You may want to know how much money you can make if you invest in a particular franchise. If a franchisor makes a claim that has a reasonable basis, the FDD also must disclose:.

Be sure to ask the franchisor for written substantiation that supports the claim. The franchisor is required to provide substantiation if you ask. An accountant can help you determine whether the claims are reasonable, and if they apply to how you plan to operate your business.

When you review earnings claims, consider:. The FDD should tell you how many franchises the franchisor has, how many it surveyed to get that figure, and the number and percentage of franchisees who reported earnings at the level claimed.

Using an average figure may make a franchise system look more successful than it really is, because the high incomes of just a few very successful franchises can inflate the average for all franchisees.

An outlet with high gross sales on paper might be losing money because of high overhead, rent and other expenses. Company-owned outlets often have lower costs because they can buy equipment, inventory and other items in larger quantities at lower prices or may own, rather than lease, their property.

Earnings may vary with geography. If a franchisor provides franchisee sales or income figures, ask if any of the supporting data came from franchisees in your area. The FDD should state whether there are geographic differences between the franchisees whose earnings are reported and your likely location.

Keep in mind that franchisees have different skill sets and educational backgrounds. Franchisors may ask you to sign a statement — sometimes presented as a written interview or questionnaire — that asks whether you received any earnings or financial performance representations during the course of buying a franchise.

If they told or gave you any information about how much your franchise may earn, report it fully on the questionnaire or other statement. For example, the franchisor may have updated its FDD each calendar quarter and must update the FDD after its fiscal year ends.

You have the right to ask for a copy of any updated information before you sign the franchise agreement. A lawyer can help you understand your obligations under the franchise contract.

These contracts usually are long and complex. A problem that comes up after you have signed the contract may be very expensive to fix — if it can be fixed at all.

Choose a lawyer who is experienced in franchise matters, and rely on your lawyer or accountant for a recommendation about whether to buy a particular franchise.

However, some franchisors give banks unrealistic, overstated profit projections so the bank will provide financing to expand the franchise system.

Several states have registration or disclosure laws that regulate the sale of franchises. Some states have laws meant to protect franchisees after they buy. The FDD should include information about any such laws in your state. The FTC works for the consumer to prevent fraudulent, deceptive and unfair practices in the marketplace and to provide information to businesses to help them comply with the law.

To file a complaint or to get free information on consumer issues, visit ftc. gov or call toll-free, FTC-HELP ; TTY: Watch a video, How to File a Complaint, at www. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.

and abroad. Visit the Business Center at business. The National Small Business Ombudsman and 10 Regional Fairness Boards collect comments from small businesses about federal compliance and enforcement activities.

Small businesses can comment to the Ombudsman without fear of reprisal. To comment, call toll-free REGFAIR or go to www. Translation Menu Español Secondary Menu Report Fraud Sign Up for Consumer Alerts Search the Legal Library.

Breadcrumb Home Business Guidance Business Guidance Resources. Franchises, Business Opportunities, and Investments. pdf The Franchise Business Model Is a Franchise Right for You?

Finding the Right Opportunity Selecting a Franchise The Franchise Disclosure Document Evaluating Potential Earnings Before You Sign the Franchise Agreement The Franchise Business Model A franchise enables you, the investor or franchisee, to operate a business. Owning a franchise comes with defined costs, franchisor controls and contractual obligations.

Continuing Royalty Payments You may have to pay the franchisor royalties based on a percentage of your weekly or monthly gross income. Advertising Fees You also may have to contribute to an advertising fund.

Franchisor Controls To ensure uniformity, franchisors usually control how franchisees conduct business. A franchisor may control: Site Approval Many franchisors retain the right to approve sites for their outlets, and may not approve a site you select.

Design or Appearance Standards Franchisors may impose design or appearance standards to ensure a uniform look among their outlets. Restrictions on Goods and Services You Sell Franchisors may restrict the goods and services you sell. Restrictions on Method of Operation Franchisors may require that you operate in a particular way.

Restrictions on Sales Area A franchisor may limit your business to a specific location or sales territory. Contractual Obligations Franchise contracts last only for the number of years stated in the contract. Terminations A franchisor can end your franchise agreement for a variety of reasons, including your failure to pay royalties or abide by performance standards and sales restrictions.

Renewals Franchise agreements may run for as long as 20 years. Is a Franchise Right for You? Your Investment How much money do you have to invest? How much money can you afford to lose? Are you purchasing the franchise alone or with partners? Do you need financing? Where will you get it?

Do you have savings or additional income to live on until your franchise opens and, you hope, becomes profitable? Your Abilities Does the franchise require technical experience or special training or education — for example, auto repair, home and office decorating or tax preparation?

What special skills can you bring to this business? What experience do you have as a business owner or manager? Your Goals What are your reasons for buying a particular franchise? Do you need a specific minimum annual income?

Do you want to work in a particular field? Are you interested in retail sales or performing a service? How many hours can you work? How many are you willing to work?

Do you intend to operate the business yourself or hire a manager? Will franchise ownership be your main source of income or a supplement to your current income?

Are you in this for the long term? Would you like to own several outlets?

We took a look at YouTube data to better understand the “try before you buy” mindset and what this new consumer decision-making process means for brands 1. Neighborhood Ratings by Zip Code If you browse sites like boking.info or boking.info, you can see various data points and resident reviews Previous purchases are often the single best guide to what a customer will buy next, but that information may be harder to capture, particularly from offline

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