Franchising

It is important that a prospective salon operator be aware that the brand and the system are there to service the customer, not to service the franchisee. It is important to note that franchising is not something anyone can just go out and do. First of all, a potential franchisor has to be in business one full year legally. Next, the franchisor needs to be able to show the franchisees how to open a business and make money at it.

Regulations

Experts agree that business-format franchising helps bring uniform standards to the industry. Franchise systems are monitored by the Federal Trade Commission (FTC), state regulations and by the franchisees themselves because compliance with regulations helps them meet the needs of their customers and provides a safe and profitable business environment. Higher standards set by tanning-salon facilities will lead to a smarter customer, which translates to a growing and profitable market.

FTC regulations also provide security for potential franchise investors. Franchisors are required by law to send potential franchisees a disclosure document called a Uniform Franchise Offering Circular (UFOC) before any money is paid or contracts are signed. The UFOC contains information including the franchise fees, estimated expenses, history of the franchise and, most important, names and contact information of both existing franchisees and those who have left the system in the past fiscal year. The UFOC must be provided to the potential franchisee at least 10 days prior to signing the deal.

Even though inaccuracy and misrepresentation carry civil and sometimes severe criminal penalties, there is no way to be absolutely sure. The disclosure document makes fraud and deception less likely. The IFA recommends careful consideration of the information provided in the UFOC, including the history and reputation of the company and its officers, with the assistance of a lawyer and accountant. The organization also recommends speaking with other franchisees of the company under consideration to help verify the information.

Fourteen states have disclosure regulations of their own and require franchise companies to file or register with a state agency including California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. These states, plus Oregon, also have disclosure regulations similar to those of the FTC. Certain other states regulate the offer and sale of franchises by means of so-called "business opportunity laws."

It’s very important for anyone who is looking into buying a franchise to choose wisely. Beware if somebody who boasts that his or her salon does X amount of dollars. Federal law makes it illegal to make earnings claims.