Attending large franchise conventions and visiting the franchisor’s headquarters are two hallmarks of the franchise due diligence process. They are also two events that have largely been put on hold during the COVID-19 era. But, franchisors are still selling – and franchisees are still buying – and those who are thinking about buying a franchise must still perform thorough due diligence in order to make an informed buying decision.
Here are franchise attorney Jeffrey M. Goldstein’s tips for conducting franchise due diligence during the COVID-19 era:
1. Spend Time on the Phone with the Franchisor’s Representatives
Franchisors are getting creative in order to attract franchise candidates and convince strong candidates to move forward with opening a franchise during the pandemic. If you are not able to visit the franchisor’s headquarters in person, you should feel free to spend as much time as you need with the franchisor’s representatives on the phone. Franchisors are using Zoom and other platforms to provide virtual tours and host group meetings, but you can (and should) schedule as much one-on-one time as you feel is necessary as well.
2. Get in Touch with Current and Former Franchisees
Talking to current and former franchisees is a key component of franchise due diligence. Current franchises in your local area may be willing to arrange a tour (if you are comfortable doing so), and you will likely find that both current and former franchisees are more than happy to give you an hour or so on the phone. During these calls, no questions are off limits, and your goal should be to gather as much candid information as possible to help with your decision.
3. Review the Entire FDD and Franchise Agreement
It is not the light reading you may have become accustomed to during the pandemic; but, if you are thinking about buying a franchise, you need to review the entire Franchise Disclosure Document (FDD) and franchise agreement. You are preparing to make a major investment in a business that will require your day-to-day involvement, and you need to know as much about the franchise as possible.
4. Hire an Attorney to Perform a Franchise Business Review
In addition to reviewing the FDD and franchise agreement on your own, you also need to have them reviewed by an attorney. Your review and your attorney’s review will serve two completely different purposes. While you need to carefully read these documents in order to learn about the franchise system, your attorney will be reviewing them to identify legal risks and determine what negotiations may be necessary.
Inquire about a Franchise Business Review with Franchise Attorney Jeffrey M. Goldstein
Are you thinking about buying a franchise in 2021? Our firm offers four tiers of fixed-cost franchise business review programs for prospective franchisees. To discuss your options with franchise attorney Jeffrey M. Goldstein, please call 202-293-3947 or request a free consultation online today.