If you are considering to purchase a franchise, you might have realized that there are many aspects you need to evaluate. In this article, you will get to know the vital factors to consider before purchasing a franchise.
It is vital to recognize the importance of due diligence. The law on due diligence requires business persons to do their investigation on the franchise before making a purchase. Once you have signed the deal, you will have to partner with the new company for several years. This brings the importance of evaluating the franchisor and the lucrativeness of the franchise. It will be best to remember that the best franchise opportunity will not necessarily be with the best product or services. There is no guarantee that the franchise will be beneficial. They differ from each other. You need to take it upon yourself to use the evaluations to determine if the opportunity is the right fit for you.
It is important to work with a qualified professional. At this stage, you know the franchise of your interest. You have also received the franchise disclosure document (FDD). The FDD contains disclosures on the business and legal issues. Some of the contents are details on the franchisor and the relevant business, and the fees you are required to pay the franchisor. With the complicated nature of the information, you will benefit more by hiring services from an expert franchise attorney. Their work is to review and investigate all content in the Franchisor’s FDD. They will compare the FDD to your expectations and help you see if it is fit.
It is highly advantageous if you can reach out to the existing franchisees and inquire about their take on the franchise you are planning to purchase. You can use their opinions to gauge what the future holds for you. Once you contact them, inquire about the approximate start-up charges, the franchisor support, how profitable the business is and their general satisfaction. In Most cases, the FDD will include a list of all franchisees.
The fact is you can negotiate. Franchisors have come up with the myth that the franchise agreements are non-negotiable. The fact is that they have a legal right of modifying the agreements. Especially when a franchisee needs to improve their rights. But, not all agreements can be modified. You can negotiate on the terms on renewing your franchise right or transferring your franchise. Also, it may include how large your territory is and the power the franchisor holds on it.
If the negotiations do not turn as expected, never shy from walking away. It is best if you watch out for any red flags and inconsistencies.