The Reason "Due Diligence" is Important in Franchising | Franchise Law Blog

Why “Due Diligence” is Critical when Buying a Business or Franchise

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For the first time franchise or business purchaser due diligence is critical.  Although the term due diligence may sound odd or out of place, it simply refers to the pre-purchase/pre-investment investigation that you undertake before signing a franchise agreement  or business purchase agreement.  In his article “What is Due Diligence in Business Acquisitions,” Ney Grant provides an excellent overview of this process.  In my book, I describe a purchasers due diligence obligations, as follows:

“A prospective purchaser must approach due diligence as a constant and continuing information gathering and evaluation process respecting each and every aspect of the prospective business and the business purchase transaction.”

As the prospective purchaser of a franchise due diligence investigation should not be viewed as a mere formality but rather an important life line standing between you and the possibility of making a bad decision.  Keep in mind that that a good decision and a good due diligence evaluation may lead you to the conclusion that the franchise that you believed to be perfect and a great opportunity may not be right for you. Unfortunately the decision is not an easy one to make and, as a franchise lawyer, I advise my clients that you must check your emotion at the door and be prepared, if necessary, to walk away from a deal.  From my clients perspective sometimes the best deals are the ones that never happen.

As a future entrepreneur there will be many opportunities available to you – take your time and make sure that you select the one that fits you and offers you an opportunity for success.

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Date: 11/02/2015 | Category: Buy a Franchise

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