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Caution 3

FRANCHISEE BEWARE!

Any decision to buy a franchise  involves making a choice between starting your own business, buying an  existing business or buying a franchise.  If you decide franchising best suits your requirements, you need to select the most appropriate franchise opportunity.  The selection  process involves an evaluation of:

  • your personal circumstances (financial resources, education, experience),
  • the business opportunity, and
  • the franchisor.

Buying a franchise is a decision that requires the same business planning and due diligence as buying an existing business.

Here are some basic steps you can perform to help you evaluate a franchise opportunity:

  • Study the disclosure document and proposed contracts carefully.
  • Make sure all promises made by the franchisor or its representative are in writing.
  • Talk with other franchisees, including those that have left the system. Find out what their experience has been.
  • Get a copy of one of the many checklists that are available for potential franchisees and answer all the relevant questions.
  • Investigate all earnings claims.  All earnings claims should be in writing.
  • Comparison shop other similar franchises or business opportunities.
  • Resist pressure to purchase before you have conducted a thorough investigation.  Sales tactics that should signal caution include:
    • "the price might go up soon"
    • "we have another buyer but I really like you better"
    • "easy money"
  • Check the franchisor out with the local Chamber of Commerce, Better Business Bureau, the International Franchise Association, Dun & Bradstreet, industry or trade associations and  franchise-related publications.
  • Consult an attorney and other professional advisors with franchise experience before making a binding commitment.

You must be prepared to invest time in planning and performing the necessary due diligence in order to ensure  that you make the best selection from the array of opportunities available.  This investment of time should be more than amply rewarded if you make the right choice.

 

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