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Advice for franchisees when buying a franchise start up

1. Get sufficient information (including accounts) before purchasing a franchise. What is the franchisor providing?

  • Is the franchisor providing equipment, stock and stationery?
  • Will the franchisor provide advice and assistance in locating and securing business premises?
  • What initial training and assistance in launching the business is being provided.
  • Is there an operations manual in existence and can you view it prior to purchase?
  • Have there been any failures in the franchise network, if so, how have they been dealt with?

2. Research the market including location, disposable income, product and buying trends which can all affect your projections.

3. Take advice as much as possible from professional advisers such as banks, lawyers, accountants and business advisers.

4. Talk to existing franchisees to gain their insider perspective on the business. Ensure the Franchisor provides you with a full list of its franchisees, so that you don’t end up just talking to those franchisees pre-selected by the franchisor.

5. Consider your strengths and weaknesses, and whether the franchisor provides any training and support to help you enhance or improve your skills.

6. Check the franchise agreement. Is it ethical? Make sure that you obtain legal advice  in relation to your franchise agreement before you sign it. Ensure that any promises by the Franchisor are in writing and attached to the agreement.

7. Get everything in writing. If your franchisor will only discuss things in person or on the phone then send an email immediately after your conversation summarising what was discussed, in order to create a written record.

8. Be aware of terms and conditions. Make sure you are fully aware of the terms and conditions you are required to comply to in your business and that you understand their implications and your exposure to them.

9. Where possible, resolve disputes informally. This is normally more cost effective than through the courts.

10. Have an exit strategy. Make sure you have an exit strategy within your franchise agreement. This is usually a sale of the business. You should check:

  • Which types of franchised businesses have the best resale value?
  • Does the agreement cover the possibility of death or permanent incapacitation? Have you made proper arrangements within your Will?
  • Establish at the outset your long-term goals. Do you hope to eventually sell your business or pass it on to a member of the family?
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