Guidance for Prospective Franchisees
By Lewis G. Rudnick Rudnick & Wolfe Chicago, Illinois and H. Bret Lowell Brownstein Zeidman and Lore Washington, D.C.
INTERNATIONAL FRANCHISE ASSOCIATION 1350 New York Avenue, N.W., Suite 900, Washington, D.C. 20005-4709 Reprinted 2002 REVISED - JULY, 1992
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CONTENTS The International Franchise Association IFA Code of Ethics What Is Franchising? Protect Yourself - Watch For The Warning Signals Evaluating The Offer The Franchise Business And The Prospective Franchisee What Are Your Qualifications? What Is The Product Or Service? - The Business Area? Who Is The Franchisor? The Company - Generally Trademarks And Copyrights Management Litigation Profit Projections Franchise Cost - Initial Fees And Cash Requirements Training And Start-Up Aid Location, Territory And “Exclusivity” Operating Practices, Assistance And Controls Premises And Equipment Rehabilitation Assignment - Franchisee’s Right To Sell Term, Renewal And Termination Competition With Franchisor The Contract Aids To Investigation 2
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4 5 6 8 9 10 10 11 13 14 15 17 17 18 20 23 25 28 32 33 34 36 36 37
Regulation Of The Offer And Sale Of Franchises Franchise Laws Business Opportunity Laws Conclusion About The Authors
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The authors wish to express their appreciation to Mark A. Kirsch of Brownstein Zeidman and Lore and Kim A. Goodhard of Rudnick & Wolfe for their assistance in the updating and preparation of the 1992 edition of “Investigate Before Investing.”
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THE INTERNATIONAL FRANCHISE ASSOCIATION The International Franchise Association is a trade association representing firms in a wide variety of industries who use the franchising method of distribution. IFA was formed in 1960 by forward looking franchise company executives who saw a need for an organization that would serve the interests of firms involved in franchising. Since its founding, the