Franchisees who are serious about buying a franchise already know that they’ll need to undergo an interview with a franchiser before they can sign the franchise agreement and make the investment. Much like any interview, franchisees know they can’t walk in unprepared. They have to do their homework in advance and that typically means being ready to answer questions that the franchiser will have about them as well as ask their own questions about the franchise.
Beyond asking questions about one another’s backgrounds and what a typical day at a franchise looks like, what else needs to happen during the interview? What other topics should you discuss together? How can you come across as competent and ready to buy the franchise and take on a role of a lifetime? Here are a few other areas of due diligence you can prepare for outside of the Q&A.
1. Have a thorough understanding of challenges in the industry
Your franchise investment, ideally, should be in an industry you have researched in-depth. You might even have experience working in it, or a passion for its offerings and services. Beyond focusing on all the good things, you should also be familiar with challenges facing by franchise owners and in the industry in general.
2. Receive a copy of and read the Franchise Disclosure Document
By now, you should have a copy of the franchiser's Franchise Disclosure Document (FDD) which potential franchisees generally receive after the franchiser has received their application and is considering it. Do not, under any circumstance, sign contracts or pay money to the franchiser before you have received this document.
3. Analyze your financial situation
Many entrepreneurs start their own business based off an original product or service they can offer the public that fulfills their needs. As such, there are several avenues of funding available for them like venture capital or grants. Franchises operate a little differently when it comes to finding financing options, so it’s a good idea to look at your finances and see if you have more than the bare minimum to cover the business expenses. Make an effort to double your numbers before interviewing with the franchiser.
4. Meet with current Franchisees
Generally there may be current and former franchisees. Try to contact both types and see if you can meet up and talk together. By asking questions to existing franchisees, you’ll get a better idea of what being in the business is like and their overall satisfaction in working with the franchiser. Keep in mind that previous owners may not be able to speak with you if they signed a confidentiality agreement. However, if they did not, you may be able to explore more through a frank discussion together as to why they left and any issues they had with their franchise.
5. Consult a legal professional
Even if you feel comfortable with all of the research you’ve done and meetings you’ve had, it’s always a good idea to work alongside a legal professional before signing the dotted line of an agreement. They can assist you with any questions you may have and help you make sense of any other concerns.
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