You are ready to make the transition from employee to franchisee, and you have determined that you have the financial wherewithal to move forward. Now the question is: Which franchise opportunity should you pursue? While many employees seek to buy into the brand they have served, as national franchisee lawyer Jeffrey M. Goldstein explains, employees should not default to this choice automatically.
Evaluating Franchise Opportunities as a Prospective Franchisee
As a prospective franchisee, you have lots of options. There are thousands of franchised brands, and all industry sectors have franchisors competing for top-tier candidates.
If you currently work for a franchisee and are thinking about buying a franchise in the same brand, this could be a good option. Your inside knowledge will be a plus, and it is important to choose a franchise based on personal interest in addition to financial potential. But, at the same time, it should not be the only option you consider.
As we just discussed, franchisors compete for quality franchisees. While there are certain standards within franchising, franchisors compete with one another on various levels. For example, when reviewing competing franchisors’ franchise disclosure documents (FDDs), you may find differences in:
- Initial franchise fees
- Royalty fees and advertising fund contributions
- Site selection assistance and operational support
- Territory rights
- Supplier restrictions and mandatory purchases
- Franchisee litigation and terminations
- Franchise agreement terms (including post-term noncompetition covenants)
These are all extremely important factors to consider when buying a franchise—and this is just a small sampling of the issues you need to consider as a prospective franchisee. By comparing competing franchise opportunities as opposed to settling on one opportunity at the outset, you can ensure that you are making an informed buying decision.
Buying Into the Brand as a Soon-to-Be Former Employee
Let’s say you do your research, and you decide that leaving your job to buy a franchise in the same brand is the right choice for you. What factors do you need to keep in mind?
First, some franchisors offer incentives for former employees. So, if this is something your franchisor offers, you will most likely want to take advantage of it. Do not hesitate to ask; and, in any case, do not hesitate to let it be known that you are a former employee of the brand.
Second, you still need to conduct thorough due diligence. The information you know as an employee may represent just a small fraction of what you will need to know as a franchisee. Talk to several current and former franchisees, visit the franchisor’s headquarters, and hire a franchisee lawyer to review the FDD and franchise agreement. You need to ensure that you are making an informed decision, and you need to give the buying process the time and attention it demands.
Schedule a Free Initial Consultation with National Franchisee Lawyer Jeffrey M. Goldstein
National franchisee lawyer Jeffrey M. Goldstein has more than 30 years of experience representing prospective and active franchisees. To discuss your transition from employee to franchisee with Mr. Goldstein in confidence, call 202-293-3947 or request a free consultation online today.
