When you buy a franchise, you also buy marketing support, business strategy, name recognition, and assistance with site location (if it’s a retail operation), among other things. However, you also give up some things.
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| If you are thinking of purchasing a franchise, it is very important to thoroughly investigate the company. |
You will never have the final say in all decisions, because franchisors typically retain rights to ensure that your business is run their way. Also, you won’t be entitled to all of the profits of your business, because franchisors typically take a percentage as part of their fees. Finally, you may be limited in your decision-making processes (e.g., some franchisors require you to buy materials from their suppliers).
If you are thinking of purchasing a franchise, it is very important to thoroughly investigate the company. Remember, you are doing more than just purchasing a name—the franchisor is going to be your business partner. Make sure that the company doesn’t want only your money and then move on to the next potential buyer.
Franchisors are required to disclose lots of information to potential franchisees. Do your homework. Talk not only to successful franchisees but also to ones who have failed. If several former franchisees tell you that the company didn’t fulfill the promises of the franchise agreement, beware.
Make sure every representation is made to you in writing before you purchase the franchise. Take notes of everything said to you, and have the franchisor sign off on them. That way, you will have a record of what was represented to you if things go wrong. HBM
The California Society of CPAs(www.CALCPA.org), the nation’s largest state, non-profit professional association representing more than 30,000 CPAs, has created a free web site of articles, tools and resources to help business owners and consumers. These resources can be accessed by going to: “Dollars and Sense.”
