5 Important Things to Know Before Buying a Franchise

Buying a franchise is an exciting process that allows you to own your own business without having to start the business from scratch. It is usually only possible to buy an existing franchise business for sale from an established company that is selling a franchise, that has some sort of financial security, which makes the investment somewhat safer. However, despite how well the franchising company may be doing, there is no guarantee that a franchise will do well. For this reason alone, among others, there are a few preparatory points that you should learn before you buy a franchise in a Franchise Resale Marketplace.

The Franchise Disclosure Document

A franchise disclosure document, or FDD, is a prepared document that a franchise corporation creates for all individuals who are interested in creating a franchise investment. The FDD is a very long document that some people fail to read before investing in the franchise. However, you will want to make sure that you read the document, page by page, to understand the terms and conditions of your investment. According to CNBC, you will want to know important things such as the renewal rights of the franchise, the franchisor’s litigation history, and any restrictions that you may have for the franchise.

getting prepared if you are interested in buying a franchise

Total Cost

There are a variety of costs that go into purchasing a franchise. You will need capital to purchase the franchise, inventory, and for legal fees so that your franchise is set up correctly. The franchise disclosure document notes the majority of costs involved with setting up your specific franchise. You will want acquaint yourself with all of these costs, before you spend a single penny on the franchise, so that you do not run out of money before you are able to properly set up the business. We’ve set up a page dedicated to professional franchise resources to help you in the buying of a franchise.

The Franchisor

The franchisor is the company who you will be purchasing your franchise from. Each franchisor offers a different franchise disclosure document, and operates their business and franchises differently. You will want to read the FDD, in addition to conducting additional research, to understand what your franchisor is like and what is expected of its franchises. Knowing the franchisor will also let you know what kind of assistance will be offered to franchisees; most franchisors are willing to help their franchises in order to keep the overall business in good standing.

Running the Franchise

You should definitely know what it will take to run the franchise once you have purchased it. Though it will vary per situation and location, you will want to be prepared for what the franchise will need to operate successfully.

Location

Will there be any restrictions as to where you can place your franchise? Location means a lot for a business, and can be a deciding factor when determining how successful a business becomes. You will want to know if your franchise will be able to run in a good location.

Save Money when Buying a Franchise

Complete all of these steps before you make any type of investment into a franchise; this will save you a lot of time and money during the process. When buying a franchise, the important thing is to know who you are dealing with and what expectations they will have for you, and also being able to negotiate in franchise agreements. It is very possible to buy an existing franchise, but your research will be the most important step of the process.