If you’re Buying a Franchise Don’t Go It Alone!

by Ed Teixeira

There continues to be a number of individuals that look to purchase a franchise without the benefit of professional advice. It can be the biggest mistake they will ever make.

Based upon e-mails and comments I receive from prospective and existing franchisees and feedback from franchise attorneys it’s obvious to me that some individuals continue to evaluate and purchase a franchise without the benefit of professional advice or counsel. Despite admonitions ranging from the American Association of Franchisees and Dealers to the International Franchise Association to franchisors there are certain people that just don’t get it. Whether you’re considering the purchase of a simple franchise concept that requires a small investment or a franchise that includes a bricks and mortar location you need to have professional advice at some step in the process. The only people I would exclude would be a franchise attorney with a financial and franchise operations background. I haven’t encountered many of them purchasing a franchise.

The numerous articles and blogs that recommend prospective franchisees to utilize professional advisors typically base their recommendation for the following reasons:

• The complexity of the franchise disclosure document and related agreements
• Understanding the legalese contained in the franchise agreement
• Focusing on and interpreting key provisions in the franchise agreement
• Understanding the franchise financial statements
• Providing financial and investment advice to the franchise prospect

However, there are other reasons, some not so apparent, why it’s important to utilize professionals in the pursuit of a franchise.

• They can provide a more objective evaluation of the franchise opportunity based upon their analysis
• Because of their experience and client practice they may have knowledge regarding a particular or similar franchise that an individual might not have
• There may be specific obligations created by the execution of a franchise agreement that are not readily apparent
• An objective third party could raise issues that go beyond simply providing professional analysis. For example, they might discern that the franchise is a risky match for the prospective franchisee.
• They may ask questions about the franchise operation that prompts or raises certain issues. An open mind can be very helpful.

Although prospective franchisees are strongly advised to engage professional advisors as part of their franchise process some individuals continue to go it alone. This approach is reckless and in the end can be costly. When it comes to utilizing professional advice in the franchise process the biggest mistake is to be penny wise and pound foolish.

© 2012 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com