Issues to Avoid When Buying a Franchise: A Preventative Approach is the Best Method for Avoiding Franchise Failure

“Buying a Franchise” is a big step that will present many long-standing implications for your finances. While there is no way to guarantee franchise success there are certainly issues that you should look out for and avoid. Here are some factors to consider:

• Check out the franchise system, franchisor and the original business that started the franchise (parent company). The company should have a solid history including a solid history of its officers and directors.
• Carefully review the Franchisor’s financial statements (FDD Item 19). Consider speaking to an accountant and evaluate the Franchisor’s “financial stability”.
• Determine all initial franchise fees “recurring” costs and expenses that you will incur as a Franchisee. It is important to take into account all fees identified in the FDD and additional operating expenses and fees.
• Make sure the franchise agreement is fair. Understanding all of the terms mentioned in the franchise agreement will allow you to determine if the opportunity is right for you.
• Carefully evaluate your proposed territory/franchise location.

For additional information on purchasing a franchise you may request a complimentary copy of “An Entrepreneurs Guide to Purchasing a Business or Franchise” by franchise lawyer Charles N. Internicola.

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