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What should I consider before buying a franchise?

Among the points which IFA recommends for investigation are:
  • the type of experience required in the franchised business;
  • a complete understanding of the business;
  • the hours and personal commitment necessary to run the business;
  • who the franchisor is, what its track record has been, and the business experience of its officers and directors;
  • how other franchisees in the same system are doing;
  • how much it's going to cost to get into the franchise;
  • how much you're going to pay for the continuing right to operate the business;
  • if there are any products or services you must buy from the franchisor and how and by whom they are supplied;
  • the terms and conditions under which the franchise relationship can be terminated or renewed, and how many franchisees have left the system during the past few years;
  • the financial condition of the franchisor and its system. Both the Federal Trade Commission (www.ftc.gov) and IFA (www.franchise.org ) have many helpful publications and resources. Equally important, IFA recommends that you engage an attorney to examine the contract. It is important to work with an attorney who understands franchising, especially the antitrust laws, the trademark laws, the Federal Trade Commission Franchise Rule, and applicable state laws. It is also recommended that you ask a competent accountant to examine your anticipated expenses, your financing needs, and your prospects for achieving your desired level of profitability before you sign any agreement.
Image for Georgio Salas
(FranchiseClique.com)
Updated: Feb 20, 2011
Word count: 238 · Read time: 2 mins
Among the points which IFA recommends for investigation are:
  • the type of experience required in the franchised business;
  • a complete understanding of the business;
  • the hours and personal commitment necessary to run the business;
  • who the franchisor is, what its track record has been, and the business experience of its officers and directors;
  • how other franchisees in the same system are doing;
  • how much it's going to cost to get into the franchise;
  • how much you're going to pay for the continuing right to operate the business;
  • if there are any products or services you must buy from the franchisor and how and by whom they are supplied;
  • the terms and conditions under which the franchise relationship can be terminated or renewed, and how many franchisees have left the system during the past few years;
  • the financial condition of the franchisor and its system. Both the Federal Trade Commission (www.ftc.gov) and IFA (www.franchise.org ) have many helpful publications and resources. Equally important, IFA recommends that you engage an attorney to examine the contract. It is important to work with an attorney who understands franchising, especially the antitrust laws, the trademark laws, the Federal Trade Commission Franchise Rule, and applicable state laws. It is also recommended that you ask a competent accountant to examine your anticipated expenses, your financing needs, and your prospects for achieving your desired level of profitability before you sign any agreement.

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