International Law

Due Diligence for Franchisees

Richard Solomon and I have a similar view about the best due diligence a franchisee can perform - work in the franchise system.The Best Answer... to Franchise Due Diligence

"The first and best way to prevent yourself from being scammed is for you to keep your investment money in your pocket and get a job with a franchisee of the franchise system you like for a year and learn it from the inside.

Even if you spend a year with a small salary, you do not lose your life savings and you are not bound to very one sided contracts. After that year, you will know every problem in that franchise system.

In almost every instance, you will be really happy you did that, and in almost every instance you will decide that you do not want to be a franchisee of that franchisor.

The reason for that is that franchises are simply not as good as the franchise sales brochures and sales pitches represent them to be.

The secondary reason for that is that you will, at the end of that year, know enough about the business that you can do it as an independent and save yourself hundreds of thousands of dollars over the life of what would have been the length of a franchise contract you might have signed.

The universal representation that franchised start-up businesses have a better chance to succeed than independent start-ups is and always was false.

The odds on success or failure are exactly the same whether one is franchised or not."

This excellent advice is almost never taken by a prospective franchisee.

Why?

The prospect rushes in, fearing that unless he or she takes this opportunity now the moment will pass them by.

The reality is that if you are well prepared then when the right opportunity shows up, you will move very quickly - at least to those looking in at you.

But never take up an opportunity just because you are told that it won't be there tomorrow.

Full post as published by Misleading Advertising Law on March 03, 2008 (boomark / email).