| Millions of people dream about owning
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| | work week? Life is too short for the
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| their own business. Having the
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| | seven-day, sixty to eighty hours a week,
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| independence that being your own boss
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| | workaholic lifestyle,that can destroy
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| brings, the security that no one can fire
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| | health, family and pocketbook.
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| you, enjoying a good income - and for the
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| | Financially, the true hourly rate for
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| most successful - the accumulation of
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| | franchise owners who work these
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| wealth and prosperity. Unfortunately, the
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| | workaholic hours is often less than
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| cards are stacked against a new small
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| | minimum wage.
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| business making it big - or making it at
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| | Minimum Number Of Employees
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| all. An endless stream of problems makes
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| | Can you operate the business with five or
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| competition from large, sophisticated
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| | fewer employees? Managing dozens (or
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| chains just too intense. Most new
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| | hundreds in the case of some fast-food
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| start-ups end as failures.
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| | operations) of minimum-wage teenagers who
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| Franchising represents a more viable
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| | are constantly quitting or simply not
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| approach to business ownership. For a
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| | showing up for work is a sure formula for
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| price, the parent company teaches its
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| | stress.
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| proven business methods to the
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| | Leasing And Location
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| franchised-operator who shoulders all
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| | For most retail franchises, the triple
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| operating and financial responsibilities
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| | net lease of the location is the biggest
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| of the outlet. The statistics are
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| | financial commitment, larger than the
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| impressive: over 40% of all U.S. retail
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| | total franchise investment. Yet, the
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| sales are through franchised
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| | typical real estate lease and its
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| establishments. While giants like
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| | ramifications are not required disclosure
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| McDonalds, H&R Block, 7-Eleven and Radio
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| | in any Franchise Offering Circular (FOC).
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| Shack are familiar, household names,
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| | For example, an estimate that you'll need
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| franchises are available in a wide range
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| | 2,000 sq. feet of space with expected
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| of industries. The list of 3,000-plus
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| | rental of $5 to $10 a foot per month is
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| franchise companies span over 100
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| | normally disclosed in the FOC's initial
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| different categories. But just as
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| | investment table as Leased Real Estate
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| franchising represents a chance to get
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| | $10,000 to $20,000. A footnote to the
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| rich, it's also a chance to get stung. An
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| | investment table may say "assumes 2,000
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| alarming number of franchised operators
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| | sq. ft. at $5 to $10 a foot." But, that's
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| make less than the minimum wage, working
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| | only the beginning of the story. The
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| seven days, sixty to eighty hours a week,
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| | lease is normally a 5 to 10 year
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| pursuing an expensive and elusive
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| | triple-net lease. So, the financial
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| American Dream that turns into a
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| | commitment made when the lease is signed
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| nightmare.
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| | is at least $600,000 (at $5/foot for 5
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| What follows is a bottom-line check list
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| | years) to $2,400,000 (at $10/foot for 10
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| of tips compiled from leading franchise
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| | years). And this doesn't include
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| experts that will help you eliminate 95%
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| | substantial, additional obligations to
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| of the companies you are considering.
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| | pay all of the landlord's yearly property
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| Then, you can concentrate your efforts on
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| | taxes, insurance, common area operating
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| the 5% "cream" of the crop" companies
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| | expenses, etc. Key questions to ask here:
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| that deserve consideration. This check
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| | (a) is the franchise you're considering
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| list assumes the franchise company: (1)
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| | one that can be operated in a low rent
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| has itself successfully operated the
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| | commercial business zone? Avoid
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| concept being franchised for at least
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| | franchises requiring the costly expenses
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| five years at multiple locations; (2) is
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| | and triple-net leases of a visible retail
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| not plagued by litigation or complaints
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| | storefront and the extravagant rent
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| from disgruntled franchise owners; and
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| | associated with areas of high foot
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| (3) has a balanced, fair franchise
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| | traffic, like shopping malls or strip
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| contract.
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| | centers. You'll sleep much better at
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| Industry Trend
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| | night. (b) What's your total financial
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| Is the franchise in a cutting-edge
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| | commitment under the lease? (c) Do you
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| industry that is doing well currently and
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| | have sufficient liquid assets (or a
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| is projected to do well in the future
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| | willing, sufficiently liquid third party
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| despite any economic slowdown? Education
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| | guarantor) to meet the landlord's lease
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| and home-improvement services are stable
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| | qualification standards? If you don't,
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| categories. Food is over-saturated
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| | you might as well forget about investing
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| generally, and except in exceptional
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| | in the franchise. Or even worse, getting
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| circumstances, is not worth the high
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| | involved in a questionable franchise,
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| investment, headaches and marginal
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| | realizing you've made a big mistake -
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| income.
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| | only to discover you're on the hook for a
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| Total Initial Investment Required
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| | $500,000+ lease obligation.
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| In general, don't expect a franchise that
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| | Image And Lifestyle
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| requires a five-figure initial investment
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| | How does flipping burgers, scooping ice
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| to produce a six-figure income. As with
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| | cream or cleaning restrooms fit the image
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| most things in life, you get what you pay
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| | of what you want to do for a living?
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| for. Is the total initial investment
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| | Investing in a franchise will be the most
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| range (including working capital) $125,00
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| | important psychological and financial
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| or less; and the maximum investment less
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| | decision you ever make. Does the typical
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| than $200,000? You can find solid
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| | working day of the franchise you are
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| companies in this investment range if
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| | considering fit your personal image and
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| you're willing to look around. Don't
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| | desired lifestyle?
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| forget to consider long-term financial
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| | Franchise Brokers
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| commitments, particularly the real
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| | Does the franchise company have its own
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| property lease (see discussion below
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| | in-house marketing department, or does it
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| under "Leasing And Location").
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| | utilize outside franchise brokers? The
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| Real Business
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| | use of franchise brokers is a definite
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| Is this a legitimate retail business, as
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| | red flag. First, it indicates the
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| opposed to a "work out of your home"
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| | franchise company is not very serious
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| operation? The vast majority of work out
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| | about who it lets into the franchise
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| of your home concepts produce marginal
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| | network (or even worse, they're desperate
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| income at best.
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| | to sell franchises). Second, franchise
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| Management Expertise
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| | brokers receive a substantial commission
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| Does the management team have executives
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| | up to 50% or more of the franchise fee
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| with demonstrated past achievement and
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| | you're paying the franchise company. They
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| experience in operating other franchise
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| | definitely do NOT have your best
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| companies? If not, this is a big RED
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| | interests in mind and will do whatever
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| FLAG. Many companies enter franchising
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| | they can to close a deal. This accounts
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| and fail to realize they are in a brand
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| | for the common observation that franchise
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| new business - one requiring entirely
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| | brokers tend to give glowing
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| different management skills and
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| | recommendations for all franchises they
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| abilities. If the management team lacks
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| | represent. A detailed analysis often
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| strong franchise credentials, you might
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| | reveals these highly touted franchises
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| as well take a trip to Las Vegas with the
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| | produce mediocre or even below minimum
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| money you're intending to invest. Your
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| | wage financial performance. Yet franchise
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| chances of making vs. loosing money are
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| | brokers won't mention this, and
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| roughly equal.
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| | individuals continue to rely on their
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| Normal Working Hours And Days; Sufficient
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| | recommendations, believing the broker
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| Income Level
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| | represents them. Nothing could be further
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| Will the nature of the business allow you
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| | from the truth.
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| to work a normal five-day, fourty-hour
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