RICHMOND – Franchising is a popular option for many Americans who want to be in business for themselves. In fact, there are more than 800,000 franchises in the United States. They offer something for almost every business interest, from fast-food restaurants and gyms to home improvement, auto repair and tax preparation services.

Franchises can provide an established business model, instant brand recognition, training and marketing support, and enhanced buying power due to the franchisor’s network.

However, buying and operating a franchise business can require a substantial commitment of time, money and resources. And there is no guarantee of success. For this reason, the State Corporation Commission’s (SCC) Division of Securities and Retail Franchising (Division) encourages Virginians who are considering buying a franchise to educate themselves before they enter into a binding legal contract to purchase a franchise.

“Consider your financial resources, goals, strengths, interests and skills and assess your risk tolerance,” said Division Director Doug Joyce. “Evaluate the company that is offering the franchise and ask other franchisees about their experiences with that company. Thoroughly review and understand franchise obligations, restrictions, disclosures, costs and your rights.”

A franchisor must provide each prospective franchisee with a detailed Franchise Disclosure Document (FDD) at least 14 days before they invest in that franchise business. Required by federal and Virginia laws, the FDD consists of 23 specific items of information, including the history of the franchise being offered; information about its officers and directors; costs to the franchisee; obligations of the franchisor and franchisee; financial statements; restrictions; franchisor operating practices, and renewal, termination or transfer of a franchise. The FDD contains the answers to many of the questions a prospective franchisee may have when assessing a franchisor and the franchise being offered. Joyce encourages prospective franchisees to read the FDD thoroughly and make sure they fully understand it before they buy a franchise business.

Franchisors are required to register franchises operated in Virginia with the Division before offering or selling them to the public. Alternatively, some franchises may qualify for an exemption from registration. To find out if a franchise is registered in Virginia, contact the Division at 804-371-9051 in Richmond or toll-free at 1-800-552-7945 or visit its website at scc.virginia.gov/RegSearches#FRANCHISE.

Additional franchising resources are available on the SCC website at InvestWiselyVA.com or the North American Securities Administrators Association website at nasaa.org/industry-resources/franchise-resources/.