10 Tips for Buying a New Franchise Business

1. Don't sign anything until you have seen a lawyer

We can help you understand all of the implications of the documents you are going to have to sign.

2. Use a specialist franchise lawyer

They have the knowledge and experience to provide you with cost effective and timely advice. They may even already have provided advice on the franchise system you are looking at. You won't be paying for your lawyer to up skill.

3. Get a good accountant who has experience with franchises

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

4. Make sure you understand your obligations in the franchise agreement

This is where your lawyer can help. What is the term? What payments are involved? When can the franchisor end your agreement? What are the restraints on you both during and after your franchise ends?

5. What are the total costs involved?

E.g. franchise fees, legal costs, fit out costs, equipment purchase etc. How will you fund your purchase? Investigate what the banks can offer you.

6. The financials – do the numbers stack up?

Will you make money? This is where your accountant comes in.

7. The lease documentation

Will you be entering into the lease or be granted a sublease/ premises from the franchisor? What is the term? What is the rental – when can it be reviewed? What happens if the lease ends or the franchise agreement ends? Will you need to provide a bank guarantee or a security deposit.

8. Supplier terms and contracts

What are suppliers' terms and conditions? If the franchisor or one of its related companies is supplying product – when can it increase the price?

9. Find out about the franchisor and the system

What is their reputation? What is their background in franchising? How successful are its existing franchisees? What are their future plans? The actual support and training to be provided by the franchisor – talk to other franchisees to get a realistic picture.

10. If you need to fitout/develop premises

What are the costs involved? Who does what? What happens if there is a cost overrun?

Additional considerations

• The premises – is there good foot traffic, will any future developments in the area have an impact? Where is your competition located?
• Are you getting an exclusive territory? If yes, can the franchisor reduce or remove this?
• What demand is there for the product and services you will be supplying? Who is your competition?
• Satisfy yourself that you are the type of person who can be a franchisee – are you happy following rules? Will you be ok with having little or no ability to be creative in the operation of your business?