Ready to buy a frachise

Avoiding the “buying a franchise” pitfalls

Sarah Stowe

These are some of the most common mistakes made by potential franchisees.

Letting your heart rule your head

If you love the brand as a customer your connection can be emotional rather than rational. Look beyond that to whether it’s a good business fit. – David Lindsay, chief executive officer at BDC Partners.

Paying too much rent

Because they’re inexperienced, many franchisees pay way too much rent and fail to negotiate landlord incentives. – Jon Sully, a director at BDC Partners 

Knowing too little about the location

If you don’t understand the science behind selecting the right location it’s very difficult to judge whether your site will generate enough business for you to make a profit. – Peter Buckingham, managing director of Spectrum Analysis Australia

Too little homework

Too many franchisees fail to do adequate due diligence before signing the franchise agreement. Once the business starts to make money, some franchisees slip up by becoming over-confident or complacent. – Greg Nathan, founder of the Franchise Relationships Institute 

Not asking other franchisees the right questions

Ask about the money, the profitability, the return, the payback and remember that unhappy franchisees can be a red flag. Remember, too, that no two businesses are identical even when they’re part of the same franchise. – Peter Knight, a business and franchise accountant with Franchise Accounting & Tax.

Not seeking the right advice

Franchising law is incredibly complex, yet some franchisees decide against a specialist franchise lawyer because they think it’s too expensive. It will cost a lot more if your business fails. – Robert Toth, Special Counsel Sanicki Lawyers