There are many reasons why buying a franchise is a sound business decision. Franchise businesses are established, they have a recognizable customer base and they already have successful branding in place. Instead of starting a business from scratch, buying a franchise lets you avoid the lengthy process of building up name recognition. You start on day one with a known product, a set business plan and a structure in place for what you will sell and where you will obtain your supplies.
Not all franchises, however, are successful. Here are a few legal tips to keep in mind before you purchase your franchise:
- Never sign a contract until you have read through carefully. The franchise contract will set out all of the terms and obligations of your franchise relationships. Each business is different. So, you may not want to start a franchise with a particular company after reading through the requirements. Some control every detail of their business while others allow franchise owners to have control over different aspects of their business. Make sure you know what you are getting into before buying the franchise.
- Look for hidden costs. In addition to the initial franchise fee, you may also need to pay rent, furnish the business, purchase inventory and acquire insurance and licenses.
- Do your homework. Make sure the franchiser isn’t selling another franchise right near where you are going to set up shop.
- Look into the franchiser’s track record. Just because you know the name of the company does not mean that it is successful. Look into the company’s past and try to determine the risks associated with your purchase. Try to focus on growth patterns.
- Seek out legal guidance. Unless you have many years of experience starting businesses and reading contracts, you should have a business lawyer with you throughout the process of making the purchase.
Purchasing a franchise may be the perfect decision for you and your family, but there are potential issues to consider before signing the contract. Make sure you understand the terms of the agreement and have a business attorney by your side to protect your best interests.