Buying a franchise is not a simple process. There are several steps involved, and you need to do everything you can to make sure you feel as confident as possible that you will be able to succeed as a franchisee. Too often, prospective franchisees rush the buying process—either because they are excited about the franchise opportunity, or because the franchisor’s sales reps encourage them to sign quickly without doing their full due diligence.
When buying a franchise, there is no substitute for hiring an experienced franchise attorney to guide you through the process. With that said, as a prospective franchisee, there are several steps you can take on your own, and it is important to be aware of the overall timeline of the franchise buying process.
Here is a checklist you can follow:
10 Steps in the Franchise Buying Process
1. Compare Franchise Opportunities
Before settling on one particular franchise opportunity to pursue, it is important to consider the competition. How are the franchised brands similar? How are they different?
2. Choose a Franchise Opportunity to Pursue
Next, it is time to choose the franchise opportunity you are going to target. From this point forward, you will be devoting a lot of time and effort to your chosen opportunity, so you will want to choose wisely.
3. Meet with the Franchisor
Once you choose a franchise opportunity to target, it is time to meet with the franchisor. Schedule an appointment via videoconference or in person, and be prepared with a list of questions.
4. Sign the FDD Receipt Pages
If the franchisor considers you to be a viable candidate, it will provide you with a copy of its Franchise Disclosure Document (FDD) and franchise agreement. You should be asked to sign the receipt pages at this time.
5. Read the FDD and Franchise Agreement
Upon receiving the FDD and franchise agreement, you need to carefully review them in detail.
6. Hire a Franchise Attorney
Once you have the FDD and franchise agreement, it is time to hire a franchise attorney. The level of engagement you choose will depend on your specific needs and your experience in franchising.
7. Speak with Current and Former Franchisees
While your franchise attorney is analyzing the FDD and franchise agreement, you will need to continue your due diligence. This includes speaking with several current and former franchisees.
8. Prepare Your Pro Forma
In addition to hiring an attorney to analyze the legal risks associated with the franchise, you need to consider the financial risks as well. Prepare a pro forma, working with an accountant as necessary.
9. Discuss the Franchise Opportunity with Your Attorney
Once your franchise attorney has completed his or her analysis, it is time to review the findings. Schedule a time to meet, and be prepared to take lots of notes and ask lots of questions.
10. Make an Informed Buying Decision
Finally, you are ready to make an informed buying decision. Based on the information you have gathered, do you believe you will be able to succeed as a franchisee?
Discuss Your Franchise Opportunity with National Franchise Lawyer Jeffrey M. Goldstein
Jeffrey M. Goldstein is a national franchise attorney who has been representing prospective and active franchisees for more than 30 years. To get help analyzing your franchise opportunity, call 202-293-3947 or request a free initial consultation online today.