Buying a franchise is a process. From the time you formulate the idea to become a franchisee to the time you sign the franchise agreement, you will go through a number of steps – some more complicated than others – that are all critical to ensuring that you open your doors with the best possible chance for success.
If you are considering buying a franchise, here is a brief overview of what you can expect along the way:
Steps in the Franchise Buying Process
Step #1: Get in Touch with the Franchisor
The first step is to get in touch with the franchisor. This could be through the franchisor’s website, over the phone, or at an expo or other franchise event. You will likely be asked to complete an application, and at this point you may also receive a copy of the franchisor’s Franchise Disclosure Document (FDD). By law the franchisor is required to provide a minimum 14-day waiting period before you sign a franchise agreement, and as a result you will likely be asked to sign two copies of a standard receipt page confirming the date on which you received the FDD.
Step #2: Hire an Attorney to Review the Franchise Agreement and FDD
Once you receive the FDD (which will include a copy of the franchise agreement), you will want to give these documents to an attorney to review. For more information on choosing an attorney to review your franchise agreement and FDD, we encourage you to read:
- Pitfalls of Signing a Franchise Agreement Without Legal Representation
- Should You Hire an Attorney to Review Your Franchise Agreement and FDD?
- Why Should You Hire a Franchisee-Only Attorney?
Step #3: Hire Other Professional Advisors
At this point, you should consider hiring other professional advisors as well. For example, you may want to hire an accountant to help you prepare a pro forma and review the franchisor’s financial statements. If you are new to the world of franchising, you may want to consider working with a franchise consultant as well. If you need help finding reputable advisors, we can provide you with some referrals.
Step #4: Perform Your Due Diligence
Throughout the process, you should be engaged in a systematic investigation of the franchise opportunity, or what is commonly known as “due diligence.” In performing your due diligence, your goal is to find out as much information you can – from as many sources as possible –to help you make an informed decision about whether to enter into a long-term relationship with your chosen franchisor.
Step #5: Negotiate the Franchise Agreement
Finally, with the help of your attorney, you need to attempt to negotiate the terms of your franchise agreement. All franchise agreements are one-sided in favor of the franchisor, and there are certain protections that it will be important for you to try to negotiate into the agreement before you sign. While most franchisors will not budge on things like royalties and initial franchise fees, you may be able to secure renewal rights, limits on mandatory renovations and other protections that can save you time and money – and limit your risk – down the line.
Considering a Franchise? Contact the Goldstein Law Firm Today
At the Goldstein Law Firm, we provide flat-fee franchise agreement reviews and work closely with prospective franchisees throughout the franchise buying process. If you would like to speak with an attorney about your franchise opportunity, please contact us online or call (202) 293-3947 today.
