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Points to Consider When Buying a Franchise

Posted by Joel Beck | Aug 31, 2021 | 0 Comments

If you're looking to own your own business but would like the security of a built-in support network, franchising may be an option for you. As a franchisee, you have the autonomy of being a business owner while also benefitting from the resources and stability of the franchisor. When considering purchasing a franchise, we recommend doing your due diligence before sealing the deal.

First, you want to make sure that you know the company, or franchisor, from which you will be purchasing the franchise. Learn about the products and services they offer, including quality, suppliers, costs, and marketing tactics. As an owner, you want to make sure that you are comfortable not only with what they sell, but how they sell it, as well. Also ask about their operations, and how they support franchisees. What all will be required of you, and what all should you expect from the franchisor?

You should also carefully review the Franchise Disclosure Document, or FDD. This document outlines key points of the company's franchise system and is a valuable resource to you as you consider becoming a franchisee. The FDD provides information on operations, costs incurred, financial information, company and franchise standards, equipment, suppliers, and more.

The FDD also includes the terms of the franchise agreement, which is the contract between you (the franchisee) and the franchisor, that allows you to operate the business within certain guidelines and standards. It will also include the terms and conditions of the franchise system, which you should carefully consider before signing. Will you have a protected territory for your sales and/or services? What kind of initial and ongoing training and support will the franchisor provide you as an operator? What payments will be required to purchase the franchise, as well as to continue to operate? Furthermore, the franchise agreement will also explain the right to terminate the agreement by either side, and the stipulations involved. You need to know what your options are should you decide to sell the franchise down the road. 

To get a clearer picture of what to expect, you may want to speak with some current franchisees. Sit down and interview them about their experience with the franchise system and ask them any questions you have and consider any advice they have to offer. While everyone's experience is different, hearing their perspective on being a franchisee will help you decide if it is right for you.

When you're ready to move forward and become a franchisee, a business lawyer can help by…

  • Evaluating the franchise agreement.
  • Setting up the business entity (such as a corporation or LLC) through which you will operate.
  • Reviewing leases, supplier agreements, and other contracts.
  • Helping you navigate employment laws.
  • Assisting with day-to-day business legal needs.

Before you sign and pay the franchise fees, it is imperative that you understand the terms of the deal. Your most valuable assets during the franchising process will be your CPA and a knowledgeable business attorney. At The Beck Law Firm, we have the experience to help you make informed legal decisions for you and your business. If you're considering purchasing a franchise and want someone in your corner, give us a call at (678) 344-5342.

For more information on starting a business, click here to request our free Guide to Starting a Business in Georgia.

About the Author

Joel Beck

Joel Beck founded The Beck Law Firm, LLC in 2007. His firm focused on business law and estate planning needs of clients, two areas that he was drawn to based upon personal and business experiences in his life, including a ten-year career at NASD (now known as FINRA).


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