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

Date: 11/02/2015 | Category: Buy a Franchise | No comments


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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