Jan 24, 2023 - Blog, Franchise Articles by Goldstein Law Firm |

So, you’re thinking about buying a franchise in Philadelphia. You’ve got a concept in mind (or maybe you don’t), and you need to know your next steps. What do you need to do to set yourself up for success? What mistakes do you need to avoid during the buying process? Can you trust the information the franchisor gives you? Here’s what you need to know.

1. It Is Important to Consider Multiple Franchise Brands

Before committing to any particular franchise opportunity, it is important to consider multiple franchise brands. The Philadelphia franchise market is highly competitive, so no matter what type of franchise you’re interested in buying, there is a good chance that there are multiple competing opportunities to choose from.

When comparing franchise opportunities, there are several factors you will want to focus on in particular. These include the initial franchise fee, royalty and marketing fund fees, system size and opening projections, and any pending litigation, among others. While you might have an affinity for a particular brand, this doesn’t necessarily mean that it is the best investment.

2. It Is Important to Carefully Review the FDD and Franchise Agreement

While you can mostly skim the Franchise Disclosure Document (FDD) for the highlights when comparing franchise opportunities, once you decide on the one you want to pursue, it will be important to review the FDD and franchise agreement in detail. This will take a few hours, so set some time aside, grab a coffee, and commit yourself to get through it. To help you understand what you’re looking at in the FDD, you can use our three-part guide:

We’ve also prepared a three-part guide for understanding your franchise agreement:

3. You Should Talk to Several Current and Former Franchisees

As part of the due diligence process when buying a franchise, you should speak with several current and former franchisees. This includes franchisees in Philadelphia as well as franchisees in other major cities. When talking to current franchisees, your goal should be to gather as much information about the current state of the franchise system as possible. What do they like? What don’t they like? Are they satisfied with their decision to invest in the brand?

When talking to former franchisees, your goal should be to understand why they are no longer in the system. Did they struggle to turn a profit? Did the franchisor terminate their franchise agreement for cause (and if so, what “cause” did the franchisor specify)? Did they end up in litigation with the franchisor? These are all answers you will want to know.

4. You Should Take the Franchisor’s Marketing With a Grain of Salt

While current and former franchisees are usually pretty reliable sources of information, you should take the franchisor’s own marketing with a grain of salt. It is important to remember that you are going through a sales process. If you are a strong candidate, the franchisor will be trying to get you to buy—and your salesperson will be trying to earn a commission.

Although franchisors shouldn’t mislead you, some bend (or break) the rules. Many franchisees commit to buying only to later discover that the franchise opportunity is not as advertised. So, don’t rely on the franchisor as your exclusive source of information. Do your due diligence, and don’t commit until you are confident that you have an accurate understanding of what you can expect if you move forward.

5. You Should Do As Much As You Can Before Signing the Franchise Agreement

Once you sign the franchise agreement, you’re locked in. You need to comply with the terms of the agreement, and you’ll need to open for business by your prescribed opening date to avoid losing your franchise. With this in mind, it is a good idea to do as much legwork in advance as possible. This includes (but is by no means limited to) taking steps such as:

Deciding how you will finance your initial investment
Developing a business plan and budget
Developing a plan to make sure you are able to open your franchise on time
Identifying your site and starting your negotiations with the lessor
Identifying vendors and suppliers for your franchise

6. You Should Make Sure You Are Comfortable with (and Fully Understand) the Franchise Relationship

Before committing to a franchise in Philadelphia, it is also a good idea to take a step back to make sure you are comfortable with (and fully understand) the franchise relationship. While you will technically own your own business, you will be beholden to the franchisor in many respects. Many franchisors impose mandatory supplier and purchasing requirements, and all franchisors reserve the right to modify their system standards over time. Even if you disagree with your franchisor’s decisions, you generally won’t have any choice other than to comply.

7. It Will Be Important to Work with an Experienced Franchise Attorney

Finally, to make sure you aren’t overlooking issues that could lead to problems in the future, it will be important to work with an experienced franchise attorney during the buying process. Your attorney can identify any concerns with the FDD, negotiate key provisions of the franchise agreement, and help you make an informed buying decision. With the cost (and risks) of buying a franchise, hiring an attorney is well worth the relatively modest investment, and whether you decide to move forward or not, you can feel confident that you are making the right choice for your future.

Discuss Your Philadelphia Franchise Opportunity with Attorney Jeffrey M. Goldstein

If you are thinking about buying a franchise in Philadelphia, we strongly encourage you to contact us for more information. To discuss your franchise opportunity with attorney Jeffrey M. Goldstein, please call 202-293-3947 or request a free initial consultation online today.