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Before You Buy A Franchise, Inspect The Franchisor

May 24, 2008
Before you even think of buying a franchise business, there are certain things that you must consider. Before you sign up with a franchisor, you must be sure of the deal you are agreeing to and fully understand both your own and the franchiser's responsibilities.

You might believe that you know enough about the brand or the company simply through using the product yourself or having eaten in the restaurant, but are you aware of what is involved in running such a business? Do you fully understand the volume of work needed to be successful, and are you able to control staff? Do you get on with people and how are you at interfacing with the public? These are all aspects of the job that you have to consider before you consider becoming a franchisee.

However, there is another aspect of franchising that you should keep in mind; the integrity and experience of the franchisor. Just before you sign up for that prospective franchise business of yours, make sure that you inspect or scrutinize the franchisor first. There's a lot more to learn from and about your franchisor than you might think there is.

In any kind of business, you always need to do some digging. You have to do lots of research and feasibility tests. The franchising world is no different. The fact that a specific franchise is well known nationally is no reason to assume that you need not investigate it before signing the dotted line. You could be investing a substantial amount of money, and you have to make sure it is being wisely spent.

You must inspect the franchisor as thoroughly as possible. You must be able to accept your franchisor as a partner that you can trust. Carrying out these checks is a three-step process. If you are being urged to come to a decision without carrying out your checks, then chances are they are hiding something from you. So why rush? Find out about your franchisor in more detail by following these three steps.

1. Check up on the credibility and reliability of the business you are entering into. This is especially important if your franchisor has been in the business for only a short period of time. Is it a new company? If so, you must carry out a background check both on the company and on the individual offering the franchise.

It's best to seek help from organizations or business bureaus to know more about the franchisor. In the USA, there is the Better Business Bureau among other groups that can help you get information about the franchisor. In the UK you can check with the Office of Fair Trading whether or not a particular company has been reported. They are the ones who might be able to tell you if your franchise is a hoax or scam and if any complaints have been filed against that company. You can also carry out a background credit check on the corporate officers of the company.

2. Talk to them. Ask the franchisor about their experience with other franchisees, and request a list of people who already have franchises. This might involve signing a disclosure statement, but if you are refused then that should set the warning bells ringing. You should be able to contact people already in the business and ask them about their experience with the company. You could ask about the help and training provided, and anything they would prefer to see improved. No reputable company with nothing to fear would refuse such a request, unless at the behest of the franchisee.

3. Seek professional help with the franchise agreement. It would be best to have an attorney and accountant review the agreement and check any limitations since the more limitations there are, the more difficult it will be when you try to recover your money.

If you follow these steps, then you should be able to enter into a franchise agreement with your eyes open, knowing that there are no nasty surprises in store for you.

However, you will generally find that most franchises are reputable and a genuine business opportunity for you. There are many opportunities online that are already making money for other people, and any one of them could be ideal for you. So check out what is available with an open mind, and make sure that the company you choose has been well checked out before you put anything to paper.

Inspecting the franchisor is one way of making sure as far as you can, that your franchise opportunity is a genuine business suitable for your investment.
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