There continues to be a number of individuals that look to purchase a franchise without the benefit of professional advice. It can be the biggest mistake they will ever make.
Based upon e-mails and comments I receive from prospective and existing franchisees and feedback from franchise attorneys it’s obvious to me that some individuals continue to evaluate and purchase a franchise without the benefit of professional advice or counsel. Despite admonitions ranging from the American Association of Franchisees and Dealers to the International Franchise Association to franchisors there are certain people that just don’t get it. Whether you’re considering the purchase of a simple franchise concept that requires a small investment or a franchise that includes a bricks and mortar location you need to have professional advice at some step in the process. The only people I would exclude would be a franchise attorney with a financial and franchise operations background. I haven’t encountered many of them purchasing a franchise.
The numerous articles and blogs that recommend prospective franchisees to utilize professional advisors typically base their recommendation for the following reasons:
- The complexity of the franchise disclosure document and related agreements
- Understanding the legalese contained in the franchise agreement
- Focusing on and interpreting key provisions in the franchise agreement
- Understanding the franchise financial statements
- Providing financial and investment advice to the franchise prospect
However, there are other reasons, some not so apparent, why it’s important to utilize professionals in the pursuit of a franchise.
- They can provide a more objective evaluation of the franchise opportunity based upon their analysis
- Because of their experience and client practice they may have knowledge regarding a particular or similar franchise that an individual might not have
- There may be specific obligations created by the execution of a franchise agreement that are not readily apparent
- An objective third party could raise issues that go beyond simply providing professional analysis. For example, they might discern that the franchise is a risky match for the prospective franchisee.
- They may ask questions about the franchise operation that prompts or raises certain issues. An open mind can be very helpful.
Although prospective franchisees are strongly advised to engage professional advisors as part of their franchise process some individuals continue to go it alone. This approach is reckless and in the end can be costly. When it comes to utilizing professional advice in the franchise process the biggest mistake is to be penny wise and pound foolish.
Ed Teixeira is a recognized franchise expert with over 35 years experience in the franchise industry. He operates franchiseknowhow.com, writes the Franchise Expert blog and consults with selected clients on domestic and international franchising. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was also the franchisee of a multi-million dollar home healthcare franchise. Ed is the author of Franchising From the Inside Out and The Franchise Buyers Manual and has spoken at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. Over the course of his career he has been involved with over 1,000 franchise locations. and has launched franchise concepts from existing business models. Ed can be contacted at 631-246-5782 or firstname.lastname@example.org