Don't forget "due diligence" -- an expression which means that no one but you has to take responsibility for asking hard questions before you buy. Sometimes, it is as simple as thinking ahead four or five years from now, what will life in the franchise look like? Does the franchise control where you get your supplies from? These might be affordable today, but what about five years from now? Even if you "think" you'll do this forever, you should have an iron clad "exit strategy" because life happens. If you don't need the strategy, great! But, if you need the exit strategy and the details weren't worked out before you signed up, the only person you can blame is you.
There are four words which should never cross your lips, "Nobody ever told me." As a prospective business owner, it is up to you to dig up anything and everything you possibly can about a potential business, even if the research costs you. And think on a timeline (in years, 2, 3, 4, 5 years, etc.) about common sense issues.
Make a list of "negotiable" items, and items that are "absolute." If a prospective franchise can meet your list of absolutes, maybe its a go! If they cannot, better to know now.
Never accept "verbal" agreements to your inquiries. Trust but verify: Sure, trust the franchise representative, but get everything in writing before you sign. Verbal = worthless.
You also need to insure purchasing the franchise entitles you to the same training program that the initial purchaser had access to at the franchisor headquarters. As you say, you are buying an existing business that happens to be a franchise...so it might not be automatic. And, double check how much time is left on the franchise agreement and what the renewal procedures are. The franchise disclosure document is the key and it should have a transfer section.
Reviewed by TSummerfield (not verified) on August 25, 2009.
You should obtain a copy of the franchise agreement and review it carefully. You should also determine if you'll be required to pay the entire franchise fee, transfer fee, royalty fees, or advertising fees. In most cases, the franchise will have to approve the transfer or sale of the franchise. If you are seeking SBA financing, it is important to determine if the franchise is one which is eligible for SBA financing.
For more information, visit the SBA franchise registry.
Upate: The URL below at the VetBizResourceCenter.com site contains some current info on the topic of franchises:
http://www.vetbizresourcecenter.com/transition.html
In the right column look for "Franchise" info
From time-to-time, entities such as Forbes.com and Inc.com publish stories on not-so-happy franchise owners. You might call these exposés. Visit business-minded websites like these and dig, dig, dig for past articles like these.
Don't forget "due diligence" -- an expression which means that no one but you has to take responsibility for asking hard questions before you buy. Sometimes, it is as simple as thinking ahead four or five years from now, what will life in the franchise look like? Does the franchise control where you get your supplies from? These might be affordable today, but what about five years from now? Even if you "think" you'll do this forever, you should have an iron clad "exit strategy" because life happens. If you don't need the strategy, great! But, if you need the exit strategy and the details weren't worked out before you signed up, the only person you can blame is you.
There are four words which should never cross your lips, "Nobody ever told me." As a prospective business owner, it is up to you to dig up anything and everything you possibly can about a potential business, even if the research costs you. And think on a timeline (in years, 2, 3, 4, 5 years, etc.) about common sense issues.
Make a list of "negotiable" items, and items that are "absolute." If a prospective franchise can meet your list of absolutes, maybe its a go! If they cannot, better to know now.
Never accept "verbal" agreements to your inquiries. Trust but verify: Sure, trust the franchise representative, but get everything in writing before you sign. Verbal = worthless.
You also need to insure purchasing the franchise entitles you to the same training program that the initial purchaser had access to at the franchisor headquarters. As you say, you are buying an existing business that happens to be a franchise...so it might not be automatic. And, double check how much time is left on the franchise agreement and what the renewal procedures are. The franchise disclosure document is the key and it should have a transfer section.
You should obtain a copy of the franchise agreement and review it carefully. You should also determine if you'll be required to pay the entire franchise fee, transfer fee, royalty fees, or advertising fees. In most cases, the franchise will have to approve the transfer or sale of the franchise. If you are seeking SBA financing, it is important to determine if the franchise is one which is eligible for SBA financing.
For more information, visit the SBA franchise registry.