Back when I first started buying businesses 50 years ago, I actually started out with franchises. And over the years I've seen a lot of crooked franchise sellers and parent companies. Some of them, it would seem, are in business for the sole purpose of screwing you over. I know that sounds harsh, but it amazes me what some franchise companies try to get away with.

Luckily, the thing that you have going for you today -- we didn't have in place 50 years ago -- is you have the franchise agreement. This is basically a document the states and federal government require the company put out there that spells everything out about the company (even things they'd rather you not know about) on paper.

And if you're looking at buying a franchise...and if you want to save a ton of time, money and frustration...the first thing to look at in this document is the lawsuit section.

Why?

Because what happens today when somebodys having trouble or somebody isnt doing well with their franchise, instead of just closing up, they will many times go to an attorney and threaten to sue the franchise company. And as soon as you threaten them with a lawsuit and open a lawsuit, they have to -- by law -- put it in their documents for anyone who inquires to see.

As you can imagine, it's very hard to sell franchises when you have two or three lawsuits pending. So usually, the franchise company ends up having to pay the person off. This is good for you because you can see how many times people have had trouble and the reasons why. If a company has excessive lawsuits then you know to stay away from it and move on to something else.

Bottom line: Before you invest more than five minutes of your time or even a penny of your money, check out the lawsuits that have been filed on the company you're looking at. It's the single best way to "pre qualify" a franchise and can save you tens of thousands of dollars, and hundreds of hours of your time down the road.