10 Tips for Buying an Existing Franchise Business

1. Don't sign the sale and purchase agreement until you have seen us

We will help to ensure the agreement contains the terms and conditions you need. We can assist you to negotiate an agreement that is favourable to you. It's too late to change things once the agreement is signed by both parties.

2. Incorporate a company to be the purchaser under the agreement

This is preferable to entering into the agreement in your personal capacity because you will continue to be personally liable even if you nominate a company as the purchaser.

3. Get a good accountant who has experience in franchising

They will be able to help you determine if this purchase represents a good investment for you.

4. Conduct a thorough due diligence

Due diligence is a period of time during which you investigate the business in order to make a final decision on whether or not you will purchase that business. During this time you will looking at things such as:

• The franchise agreement and any associated documentation
• The financials – do the numbers stack up? Will you make money?
• The lease documentation
• Employment contracts
• Supplier terms and contracts
• The actual support and training to be provided by the franchisor
• The plant and equipment you will be purchasing – What condition is it in? Are repairs required?
• The premises – Is there good foot traffic? Will any future developments in the area have an impact on the business? Where is the competition located?

5. Find out why the Vendor is selling the business

Will these reasons have an impact on you?

6. Find out exactly how much money you need

Include legal expenses, accounting costs, initial rental payable, working capital, set up costs and costs of obtaining a bank guarantee etc. Make sure you can pay the deposit when you need to.

7. Understand your obligations under the lease

Lease payments are often the biggest long term commitment for a business and it is essential that you know exactly when landlord can increase rent. What amount of time is remaining under the lease? Are there any rights of renewal? What are the make good requirements? When is the next rent review/ renewal due? Is there any maintenance or repairs which the vendor should have attended to.

8. Restrain the Vendor

Make sure that the Vendor cannot compete with you once you have bought the business. Also, make sure that the right people are restrained e.g. for example directors and shareholders of the Vendor company.

9. Access to premises prior settlement

You should inspect the premises and business assets prior to settlement to ensure they are in the same condition they were in when you last inspected them.

10. Investigate the franchisor

It is important that you know who you are dealing with and what support and training they will provide in reality.