Buying a Franchise with Confidence – Part 2
Logical steps for entrepreneurs buying a franchise –
4 – Franchise Due Diligence
Personal planning and narrowing choices will be for naught when buying a franchise if not followed up with serious franchise due diligence. This is where the process moves away from introspection and into investigative skills.
Knowing how to dissect a franchise and separate salesmanship from facts is an art form. Naturally, first time buyers are at a disadvantage at this point. Why wouldn’t they be? It’s brand new to them. Being careful is important, but being careful of ‘what’ is the issue. Learn to discern between what is being said and what is being sold. If unclear, get competent help. From disclosure documents to sales literature to home office visits there is a lot to examine, and a lot in the gaps between. Buying a franchise is not only tricky business, it’s a complicated business. On both a personal and business level there many pitfalls to avoid. But first the pitfalls have to be identified.
5 – Franchise Brokers
Sometime in the 1990’s independent franchise brokers began referring to themselves as franchise ‘consultants.’ Until that time the term consultant was used exclusively by ‘fee for service’ consultants involved with creating new franchise brands and advising on purchases. Now, the hundreds of brokers calling themselves consultants have made it difficult at best for new comers to discern who and what they are dealing with. The only word of caution is this. Franchise consultants/brokers have one purpose and that is to introduce prospects to franchisors that will pay a fee (commission) if the prospect buys. Regardless of how the services are described, that is the goal. That is not consulting. The fee for service franchise consultant charges a fee to work for and represent the buyer. When a advertisement reads ‘Free Franchise Consulting’, you have a broker. Enough said.
6 – Go Slow
Check and double check everything that is said and everything that is written. The sad truth is, most franchise buyers do not understand what they’ve purchased until long after the sale and the business is in progress. This is because they did not take the time to conduct proper due diligence and understand how they’re life was about to change after the purchase was made. Franchising is not nearly as secure and safe as you are led to believe. In fact, the failure rate is quite high. Be very careful.
It is quite amazing to think that people will spend their life savings (and borrow more) to purchase a franchise that they do not understand. It’s even more amazing to think that at the same time, people will not a pittance for pre-purchase counsel. Penny wise and pound foolish is the phrase and it’s human nature. But then again, salesmanship goes a long way.
For further information on how to buy a franchise, explore this site and be sure to read the articles.
See Part 1 here: https://www.bibbygroup.com/buying-franchise-confidence-part-one/