"I am thinking about buying a franchise with a territory located in a city or town other than where I live. The franchise documents give me the option of operating out of my home or renting office space. What are the pros and cons of either option?"

This is a major decision that every small retail or service business faces at some point, but with franchised businesses there are a couple of unique issues.

— Visibility/Customer Perception. A lot of people like to deal with "local" small businesses. Since your business will not be operating within the city or town where its "office" (your home) is located, it will not have a telephone listing in the local telephone directory unless you pay for a Yellow Pages ad. You will also not have a "trade name certificate" or "DBA" filed with the local town clerk's office, so anybody trying to locate your business for official purposes or otherwise will not know where (or who) you are. Your trucks and other motor vehicles (if the franchise requires you have one) will be stenciled with a city or town other than where your customers are likely to see them.

For this reason alone, I would think seriously about renting office space in the town or city where your franchised business will actually be conducted, but there are other considerations.

— Trade Name Certificate. Speaking of "trade name certificates," your franchise is almost certain to require that you file one with your county clerk or town clerk's office telling people who is operating their franchise locally. The certificate will require you to disclose the business address, thereby putting government authorities on public notice that you are working out of your home. You can get around this by purchasing a "private mailbox" at your local UPS Store and using that as your business address when you file the trade name certificate.

— Zoning Certification. Many franchises that permit home ownership require you to state clearly in writing that you have examined the local zoning laws and have confirmed that your home office does not violate any local zoning laws and ordinances. This puts you in an extremely difficult position: either you visit your local zoning authority to ask permission and risk getting turned down, thereby being forced to rent an office location for your business; or you "let sleeping dogs lie" and submit a false statement to your franchise, which will get you kicked out of the franchise (perhaps even sued) when they find out about your deception.

Unless you live in a town that will let you buy a "home office permit," or you live in a "combined commercial/residential use zone" that permits certain types of businesses in home offices, the zoning authorities are not likely to bless your home-based business. Even if the answer is "maybe," you have now alerted the local authorities to your business, and they will keep a close eye on your activities. Even if the answer is "OK," the zoning authorities are not likely to put their decision in writing; they can always change their minds later on and shut you down.

The better approach here is to acknowledge to the franchise that you are responsible for ensuring that your home office complies with all local laws, including zoning ordinances, and that you will indemnify them against any liability may incur as a result of your failure to comply. That way the franchise is protected in case the local authorities do try to shut down your home office, and you have not lied to anyone.

— Employees and Customers. The key to running a successful home office is to keep your business as invisible as possible to your neighbors and other people who might report you to the local authorities. If the franchise requires you to have employees, do not allow them to work out of your home or visit your home frequently — the sight of 16 parked cars outside your house every day will alert people that there's more going on in your home than the occasional funeral.

Try to avoid seeing customers in your home office. If people show up at your home early for appointments and sit around your front lawn waving at passers-by, your neighbors will soon figure out that they can't all be your relatives.

— Telephone Numbers. If you work out of a home office, be sure to have a separate telephone number, fax number, laptop computer, Web address and e-mail account for the business. The franchise will periodically audit these, and you really, really don't want them to see your teenager's blog. Also, if the franchise doesn't work out, you will be required to transfer all of these over to the franchise company so that they can continue the business, and you don't want to have to get a new number for your home. Having said that, though, I can't think of any better revenge against a franchise that hasn't worked out than to give them a telephone number that your teenage daughter has handed out to all of her boyfriends . . .

Cliff Ennico (cennico@legalcareer.com) is a syndicated columnist, author and former host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.

COPYRIGHT 2008 CLIFFORD R. ENNICO.

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