Franchisee resource center

It's no secret that professional athletes make boatloads of money both on the field and through lucrative endorsement deals, but what many fans don't realize is that these big-money stars often blow all their cash in spectacularly bad business ventures.

As a preliminary matter, it is important to understand the distinctions between trademarks, copyrights, patents and proprietary information.

One key aspect of Item 12 is establishing how franchisees’ territories will be defined. This may be by zip code, population, population with certain demographics, or geographic or political markers (i.e. streets or county lines). For franchises with population-based territories, a franchisee in a busy downtown urban area may have a territory of only a few blocks, while a rural franchisee’s territory could reach for miles.

In addition to the due diligence that should be performed, be sure that you and your advisors focus attention on:

In Item 8 of the FDD, franchisors are required to disclose designated and approved suppliers, franchisees’ mandatory purchases, and any rebates they receive from vendors as a result of franchisee purchases.

Your approach as a potential franchise buyer is to identify the real investment dollars you’ll need to get the franchise to profitability. The initial source of this information is Item 7 in the FDD. Item 7 is a schedule that details the estimated investment in the franchise. This schedule includes the cost of various items, including: the initial franchise fee, training related expenses, rent, insurance, professional fees for legal and accounting services, supplies, equipment, licenses and permits and additional working capital. Depending upon the specific franchise, there may be added categories. When reviewing the Item 7 schedule it’s important to know that franchisors are not required to list every type of fee or expense that might be part of the investment in the franchise but rather the likely investment needed to start the franchise. As you work to establish your investment number keep in mind the words “estimated” and “typical.” Item 7 is a guide, and as such, you should use this information accordingly.

If a franchisor does not offer refunds or installment terms (which is not unusual), it should include a “negative disclosure” to this effect in Item 5 (i.e. “We do not offer full or partial refunds under any circumstances.”).

The Krystal Klear Water franchise specializes in providing clean, mineral-rich drinking water to their customers through specialized water filtration systems. Franchisees provide water contamination testing, preventive maintenance, and in-home, naturally purified water. The health and fitness nut will love this franchise because Krystal Klear's water systems have less pollutants than the competition. The systems are also low maintenance and do not add salt to the water like other water softening systems. This residential water filtration supplier targets an annual market size of approximately $2.6 billion, with sales growth projected to grow at rates of 6-8% per year. Sounds like the same amount some gym rats spend at GNC each month.