Two Key Questions to Assess Before Buying a Franchise

When considering the purchase of a franchise, there are two important questions that need to be carefully evaluated in order to better assess the risks involved.

Question 1: How long has the franchise been in operation?

If you are among the first five franchises of a particular brand, you may face higher risks. This is because the operating model of these franchises may not yet be fully developed, and the market acceptance of this business model may be uncertain. In such cases, it is important to exercise caution and gather more information before making a decision.

While you can find some relevant information online, it is essential to ensure the accuracy of this information. Prior to purchasing a franchise, the franchisor must provide you with a Disclosure Statement, which includes information about the business operations and any litigation history. To ensure a genuine understanding of the franchise’s situation, it is advisable to consult with a lawyer who can review all the documents and provide professional and reliable business analysis.

Question 2: Is there written evidence of the business’s profitability?

Understanding the expected profitability of the business is crucial before buying a franchise. Relying solely on verbal promises from the franchisor is not sufficient. Instead, you should request that these commitments be clearly documented in writing.

By doing so, if the actual profitability falls short of the promised levels in the future, you will have legal grounds to sue the franchisor for deception or misleading practices and seek contract termination. Therefore, it is important to have a clear understanding of the anticipated profit potential before signing any contracts, as this will provide you with greater protection.

Therefore, if you want to buy a franchise, we strongly recommend that you contact a franchise lawyer immediately so that you will be able to make a more informed decision.