Due Diligence Checklist

Posted by digiadmin on December 20, 2021

Many important tasks are thrust upon you as a franchise owner, and it can be downright overwhelming at times. It helps to systematize everything into an easy-to-follow “to-do list,” especially when you’re deciding on investing in a potential franchise business.

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Let’s cover the various things you need to do to make a smart investment in your future as a franchise owner and set yourself up for success.

The Franchise Starter Due Diligence Checklist

  • Employ the help of a dedicated franchise-brokerage firm, like FranSave.
      • One of the best things you can do to alleviate the early confusion in franchise-finding is to get someone to guide you along the way. So, if you’re trying to start a franchise, a brokerage firm like FranSave can shine some light on the best opportunities and save you the time of chasing after less-lucrative deals.
  • Comb through all the details of the Franchise Disclosure Document (FDD).
      • Once you’ve identified a great franchise system and they’ve given you an FDD, it’s crunch time, and you’ll want to make sure you read the fine print. You have two weeks to do so before it’s time to sign a Franchise Agreement. This is where you get with your attorney and pay attention to several items, such as:
        • Franchisor background
        • Litigation history of the business
        • Investment costs and royalty fees
        • Your obligations to the franchise
        • The amount of turnover from other franchise units
        • All the essential financial information
  • Analyze ALL aspects of your potential franchise deal.
      • You should be wondering if this prospective franchise system positively matches your goals and objectives as a business owner. How big is the business? Do you fully understand its brand? What are its marketplace strengths and weaknesses? Are you going to get adequate training?
  • Make sure you know the costs and ROI of this investment.
      • The two early humps that you must get past are the initial launch costs and getting used to the royalty fees. Those aspects may seem overwhelming in the beginning. If, however, you have a clear idea of the return-on-investment (ROI), then you’ll be able to quantify a tangible dream, and go right for it. Make sure you know these figures precisely, not just rough estimates.
  • Develop a relationship with the franchisor and investigate potential pitfalls.
    • Whenever the franchisor becomes distant and aloof, it’s bound to hurt your chances of success. The more you know him/her, the better you’ll grasp their vision and strategy for the franchise business. Before you even get to the Franchise Agreement, be as certain as possible that there aren’t any red flags and that the franchisor answers all reasonable inquiries. Keep a keen eye for potential pitfalls such as a business that’s been through more than its fair share of litigation or internal conflicts. You can also gauge the company culture by speaking with other franchisees in the system.

FranSave presents this general guideline as a starting point and framework for launching your business from the perspective of a franchisee. This is by no means exhaustive, and, as we mentioned, you want to include the help of relevant consultants and experts early in the process. That’s why if you have any need for assistance or just want to ask questions, you’re more than welcome to contact us by calling 844-476-7776.

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This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your jurisdiction. Franchise offerings are made by Franchise Disclosure Document only.

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