Franchise Advice Royal Oak MI
Franchisors - 3 Ways for a Franchisee to Check Them Out
The idea behind franchising is to help a franchisor expand his company. But franchisees also have power . And it’s at the beginning of your relationship with the franchisor -- when the potential match-making is still going on -- that you as the potential purchaser of a franchise have the most leverage.
This is where the process of “due diligence” comes in. Before you invest tens or even hundreds of thousands of dollars in the “next McDonalds,” you must conduct due diligence to make sure that this franchisor will be able to keep its promises. And while you can probably count on the integrity of the people behind the Golden Arches, for example, it can be a much more difficult call with one of the many new franchising companies that are popping up.
“Time is really on the side of the franchisee as these relationships are coming together,” says Brent Eckersley, an associate of Hale Lane, a law firm in Las Vegas that specializes in franchising. “You need to do your due diligence and take your time. There is no pressure on you to make a closing. But it’s ‘buyer beware’ in this business, so you need to know what risk you’re taking if you’re going to buy a franchise .”
And believe it or not, most franchisors would rather that you discover there isn’t a good fit for you before you sign their contract rather than after. “It takes 10 times as much effort and money to get the wrong person out of a franchise fit than to prevent it in the first place,” says Carlton Morris.
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