Top 3 Due Diligence Steps For Franchise Opportunities

Homework. That word can conjure up some pretty ugly visuals.

                                             

          

                                           

  Homework needs to become your friend...

When your interest level in a particular franchise opportunity gets to a high level, it is time to start focusing on the franchise due diligence process. If you know how to thoroughly research and vet a franchise, your risk will be lowered, significantly. If you rush through your due diligence, or skip a step in the process, you are risking financial failure.

Here are the top 3 things you need to do:

1. Request the FDD. {Franchise Disclosure Document.}This used to be called the UFOC.
The FDD is the document that the franchisor will be giving you to review. This is the most important thing that you will be receiving from the franchise company that you are investigating. It may come in the mail, but most likely you will be given an access code to use on the franchise company's website in which you can access the FDD at your convenience.The FDD has all the data about the franchise company.

2. Read the FDD, from cover to cover. Boring stuff. Really boring stuff. Really important that you read it from cover to cover. Write questions down as you go. It is ok to write on it. {If you read through this rather large document, and have no questions, then you should be afraid. Very afraid.

3. Commit to calling 10-12 franchisees of the franchise company that you are interested in. Calling this many franchise owners will enable you to find happy ones, and unhappy ones. The most important question you need to ask: "If you could do this all over again, would you invest in this franchise?"

These questions are a great start. If you would like to find out several other things you need to do to protect yourself, and hopefully lower your financial risk, click the link below.

Here's where to complete your franchise research/ due diligence

More On The FDD.

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Comments

[The Franchise King]

Sam,

You made some pretty good points, but I disagree with this one;

"Franchisees are lazy entrepreneurs."

Franchisees are folks that want their chance at The American Dream. That's all.

The Franchise King®

[Sam]

My experience in owning a franchise is to tell prospective owners this:
1. Listen to the dissenters. Most people want validation to what they want to do. The dissenters may hold key to what really is happening vs. those who may just want to brush you off. Also, talk with those who have been in the system a while. New franchisees know about as much as you do.

2. Don't be a guinea pig or the "future model".

3. Talk to people like myself (disclosure: i consult people on buying franchises as well, but i am not here to promote me) - the one thing i learned is I was not the ideal franchisee. I would have been better buying a business. Someone i know who owns several franchises put it best: Franchisees are lazy entrepreneurs - do you want control or do you want to do what someone wants you follow.

4. Make sure your better half is on board and that you have the skills & financial means to make it through a few years (literally in most cases) not to have an income. Not all (& probably most) franchises are not instant gold mines and still need nurturing and the right business mindset to make it work.

There's more but that is my 2 cents and experience. Good Luck - it's still better to work for yourself than someone else.

[Max Westphal]

Nice article thanks for the tips.