Due diligence before buying.
WHAT TO OBTAIN
The franchise agreement, in full Any disclosure document provided Financial information about the franchisor The operations manual, or a description of it Details of the territory Full details of every cost
WHAT TO ESTABLISH ABOUT THE FRANCHISOR
How long they have operated How many outlets, and how many they own How many franchisees have left, and why Their financial stability Whether they have been in disputes
WHY OWNED OUTLETS MATTER
A franchisor operating none of their own has not proven the model recently.
WHAT TO CALCULATE
Total investment required Working capital until profitability Realistic monthly revenue All costs including fees Resulting income
WHAT TO BE SCEPTICAL OF
Revenue figures provided without evidence Averages that conceal wide variation Projections rather than actual results
WHAT TO ASK FOR
Actual results from existing outlets.
WHAT TO DO IF REFUSED
Treat it as significant.
WHAT TO ESTABLISH ABOUT THE TERRITORY
Whether it can support the business Whether it is genuinely exclusive What happens if it is redrawn
WHAT TO ESTABLISH ABOUT EXIT
Whether you can sell On what terms Whether there is a market
WHY
A franchise you cannot sell has no capital value.
WHAT TO HAVE REVIEWED
The agreement, by a solicitor, before signing anything.
WHAT TO NEVER DO
Sign under time pressure.
