Check Out your Franchise



What to Check Before Buying
Before buying a franchise you need to sit down and talk with your accountant as well as a franchise lawyer and get answers for all questions that you may have in your head. You should ask for full disclosure documents and the franchise agreement that the franchisor would hold. This is because you will need to go through them with your advisers.

There are 5 main areas that you need to look at when checking at franchise before buying.

These are:

  1. Check the franchisor.
  2. Check the product or services involved.
  3. Check the financial costs involved.
  4. Check the financial agreement you have to sign.
  5. Check yourself as the Franchisee or owner or buyer of the franchise.


Features to Look For In a Franchise
Look for these things:

  1. An established franchise system that has a good name and record of success.
  2. A good relationship between the franchisor and other Franchisees in the group.
  3. That the franchise runs under ethical business practises. This can be proven by talking to existing Franchisees.
  4. That the franchise provides full training for the owner and employees.
  5. Exclusive - that the franchise provides exclusive territories. This is important so there is no competition with other Franchisees.
  6. That there is a good spirit of cooperation and goodwill between the franchisor and Franchisee. That is, the partnership is one that will work.
  7. That the franchise produces a type of business that you could happily put your name to and be proud of.

Protection with Membership of a Franchise Association
If you are a Franchisee you will find more comfort from the franchise you are buying if the franchise business is a member of a recognised franchise association.

This is because of the protection the Franchuise Association can give you in 3 main areas.

  1. Full Disclosure. Every member of the association must provide full disclosure by way of a disclosure document. The disclosure document provides simply that - full disclosure. It covers all areas of the business including track records, financials, systems etc so that you have before you all the information you will need to assess when making a decision. The disclosure document must be provided prior to you signing any agreement. This is done so you have the time to take the information to an independent lawyer for advice.
  2. Cooling period. Most associations provide a minimum 7 -14 day cooling off period after you have signed up for the purchase of the franchise. This gives you comfort in that you'd know that if you found after buying that there were problems or matters subsequently arose that had not been explained to you then you could cancel the deal. This was good because if you felt you had been pressured into a purchase there was a way out within 7-14 days.

  3. Code of Practise. All members have to abide by the Terms of the Code of Practise and Code of Ethics agreed to by all members.