"The first step before investing your money in any security or business venture is to do your homework," said Bill Beatty, the department's director of securities. "For franchise investors, this means, at a minimum, reviewing the franchise disclosure document and getting in touch with current and former franchisees.

According to Forbes, picking the right franchise company is crucial to opening a profitable business. With nearly 3,500 franchises to choose from, each governed by a Franchise Disclosure Document that is about 400 pages long, this task may prove daunting to many entrepreneurs.

Robert Bond, publisher of Bond's Franchising guides and chief executive of the World Franchising Network, a franchise database, says that investors often pick franchises for their brand name.

"One of the reasons people buy a franchise is they have instant credibility". "If you are a lesser known franchise, it takes years to get that national recognition."

Experts admit that big name companies demand higher startup fees, but the long term investment is often worth it.

"Because they are big, they are not lusting after franchise fees and royalties". "The best ones take care of their franchisees. A lot of franchisors don't provide value to the franchisee. Unless they do that on a long-term basis, the system is not going to work."

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