A franchise is an independently owned and operated retail business that is being backed by and marketed by a "parent company." This agreement allows the buyer of the new franchise unit to be a student and the parent company is kind of like a mentor.

Some of the biggest advantages to buying a franchise include...

1) The reputation of the parent company. These companies usually spend years build trust in a community. As a franchisee you buy that reputation, and the community will already be willing to trust you, which will free you up to focus on your business.

2) There is already a proven system of operations in place. The parent companies have perfected the way that the business should operate, so you will not have the burden of learning through trial and error. The large corporation has already done that for you.

3) The corporations care deeply about your success. You might be thinking, "I'm supposed to believe that these money hungry multi-billion dollars a year in sales corporations are going to care about me?" Well, yes. You would be representing them and their product. If you fail, so do they by losing a customer base that they have tried for years to get to remain loyal.

4) They have excellent support. They want you succeed so they have instituted the tools you need in order to do so. More so, they are there to help when you have a crisis. Remember, you are representing them, so they need you to do well and they will do what it takes to make sure you do.

"It is starting to sound too good to be true. What's the catch?"

Well, as with any business proposition, there are a few disadvantages.

1) If the parent company is very large, it can be hard to get approved to open a new unit. If they already have a saturated market, it is in their best interest to focus on the existing units, than to open a new one. You can, however, get around this. You could buy an existing unit, which has its own advantages. This way you can see the profits that the business makes, the way it operates and exactly what you are getting yourself into.

2) There are a lot of rules to follow. This is especially true if the parent company is a very large corporation (Starbucks anyone?) This cannot, however, be seen as a true disadvantage. These rules are in place to ultimately help your business succeed, so really, they are helping you out.

3) It could be hard to be approved to get the branch. These large companies get thousands of inquiries for franchises a month. That means there is a lot of competition for the buyer. You have to be aggressive and play up your strengths. Or you could go with a smaller company, which has its own advantages, such as, much less market saturation.

When selling franchises the franchise sales person needs to know that they cannot give any earnings claims to the prospect of franchisee unless those earning claims can be documented and substantiated through audited financial statements.

Further the franchise sales person needs to realize the franchises and information and 

there needs to be at least eight or more franchisees and a specific region where the prospect of franchisee is located at have made or earned that level of earnings, which the franchise sales person is claiming.

If a franchise sales person lies to a prospective franchisee then this is consider fraud. If a franchise sales person lies to a prospect of franchisee this can result in legal action by the franchisee and hurt the company.

Franchise companies should be well advised to stay away from franchise salespeople who embellish the story. As a former franchisor it became rather obvious that it was very hard to find a franchise sales person with the proper integrity to offer our franchisees to the public.

In fact we decided in our franchise offering circulars to not have substantiated earnings claims because we were afraid our competition would find out all of our data. This meant that the franchise sales person could not tell the franchise customer or buyer how much money they would make.

Actually this is too bad for the franchise buyer, but that government has determined that this is the proper way to enforce this issue to prevent fraud. The temptation to give earnings claims to franchise buyers prior to the sale is intense because the franchise buyers keep asking over and over again prodding for the information.

Indeed in my opinion they deserve the information that the government regulations make it nearly impossible to give the information that the buyer needs to make a proper decision.