Buying a Franchise

5. Final Reality Checks

Do not commit yourself in any way before completely evaluating the franchise.

Do not pay any non-refundable deposit and do not part with money until the draft agreement is seen by a lawyer.

5.1 Visit the franchisor. Ask specific questions about anything which is not clear from the prospectus.

• Do the people seem honest and open?
• Are they trying too hard to sell the franchise to you? Do not allow yourself to be hurried into making a decision.

5.2 Get a sample contract for your lawyer to examine.

• Never enter into any franchise agreement without legal advice.
• Use a lawyer who has experience of franchises. Many large legal firms have a specialist, while smaller ones may have individuals with relevant expertise.

5.3 Visit at least two franchisees - and phone at least three more. This will help you find out what the risks and opportunities are.

• Ask them how their business is going, what they think of the franchisor, and what problems they are having.
• Insist on a full list of all present and past franchisees, including any that have failed. Beware of franchisors who refuse to reveal this information.

5.4 Carry out your own market research in your proposed territory. Even if the business works elsewhere, you need to be sure it will work in your area.

• What possible customers are there?
• What competition is there?
• What are the long-term prospects?

5.5 Prepare a business plan, just as you would for any other start-up business. Base this on your market research and on your own financial projections - not those provided by the franchisor.

• Consult your professional advisers for any help you need.