Due Diligence on a Franchise Purchase

Posted on 1st June 2016 at 4:10pm by Carl Reader in Business

Whilst due diligence might not seem to be the most exciting part of investing in a franchise, it is a necessary function to avoid a potentially very expensive mistake! Checking BFA membership, as mentioned above, is just one part of this.

I regularly speak to prospective franchisees about what to look for when investing in a franchise, and perhaps the most important piece of due diligence work that you can do is to talk to existing franchisees. Any franchisor should provide you with a full list of franchisees to contact, and this list shouldn’t just be edited to include the happy ones! Having said that, it is worth speaking to the franchisor to see if there are any franchisees that they would particularly recommend that you speak to, as there may be franchisees who have similar experience levels as you, or are operating under similar conditions. Be sure to ask the franchisees that you speak to if they are happy with the network, and ultimately if they would recommend that you join the network.

Desk research on the internet is another possibility, but approach this with caution – remember that most reviews posted online are either negative or fake! It is rare that the happy purchasers of any service or product proactively take to reviewing their experience online; whilst those with problems (or competitors) are more than happy to share their experiences, real or fake.

The above is an extract from The Franchising Handbook, which is due for release imminently. Follow this link to pre-order and be one of the first to read it!

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