05/12/08

Steps to Take After You Choose Your Franchise

Once you have chosen which franchise is right for you, your job has just started. The process of investigating and buying a franchise should be done very carefully.

Do Your Homework

Research the history of the franchise and the franchise company via the Internet. Try searching for press releases on the company. Even though a franchise may have a popular name, there may be some issues that you may not be informed about. If the company has been in existence for five years or less, it is wise to pay special attention to the pace of growth and its franchisees' geographical locations.

Find out how many franchises were opened during the last several years as well as how many, if any, have closed. Determine if the franchise has been growing at a reasonable pace so that you can get a good idea of the stability of the operation. Also, talk to other franchisees, including former ones, to find out how happy they have been with the franchisor.

Documentation

It is important to be diligent about reading and understanding all documents provided by the franchisor. It is highly recommended that a potential franchisee obtain the services of experts, such as a franchise attorney and an experienced accountant. The attorney can review and explain the Uniform Franchise Offering Circular (UFOC), as well as the franchising agreement. The accountant offers the expertise of thoroughly analyzing the financial stability of the company.

Also, be aware of all fees that are involved. You are likely to encounter an initial franchise fee, royalty fees, and sometimes mandatory advertising contributions. These costs should be compared to determine if they are in line with other similar franchising opportunities. Your franchise attorney or accountant can help you decide if the fees are reasonable.

Most importantly, make sure you include all terms and conditions in writing. You don't want to run the risk of any misunderstandings between you and the franchisor. If your attorney negotiates any revisions for you, confirm that your agreement is updated accordingly.

In Summary

Overall, if you take your time and do thorough research before making your investment, you will ensure you are making the right decision.

Don Daszkowski

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