le·gal·ese /lēgə’lēz/noun
1. The formal and technical language of legal documents that is often hard to understand 2. Need-to-know legal advice from Jason Power
Before you Buy
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Follow this checklist for due diligence
ou probably research cars before buying one and read a restaurant’s reviews before making a reservation. So it makes sense to do the same research—your due diligence—before investing in a franchise. The process should include a study of the local market that exists for the franchise’s products and services, conversations with other franchisees, a review of the Franchise Agreement by a lawyer, and participation in the franchisor’s Discovery Day. Follow this checklist to ensure you’re thorough with your due diligence.
2. TALK TO OTHER FRANCHISEES. Just as you read reviews for a vehicle or look at the menu of a new restaurant, you should learn from those who came before you. When you speak with current franchisees and those who were recently terminated, ask them: Are you profitable? Does the franchisor help with your problems and questions? How do you deal with competitors? If you could go back, would you buy this franchise again? By asking these questions early in the process, you avoid the potential for catastrophe.
1. RESEARCH YOUR MARKET. Does your market need the product or service? Have you called your future competitors to learn about their prices and customer service? Have you tested their products? These actions are crucial. There are dozens, if not hundreds, of stories about a franchisee introducing a product or service that was rejected by people in the territory and the cost to educate them about it was prohibitive.
3. HAVE AN ATTORNEY REVIEW THE FRANCHISE AGREEMENT. Having an attorney who is well-versed in franchise law is a must. But you also have to read the Franchise Disclosure Document, Franchise Agreement, and all exhibits, too. If you do not read the documents and then prepare a list of related questions and concerns for the attorney, he or she can’t fully help you understand your rights, roles, and obligations.
FranchiseDictionaryMagazine.com
