If you want to buy a franchise business, it is always a good idea to get independent legal advice from a specialist lawyer with experience in the franchising space. In deciding which lawyer to go with, there are several important considerations you must have in mind.

 

It is useless seeking legal advice from a lawyer who has not worked in franchise law, as you will end up paying for them to build up their knowledge in a practice area in which they’re completely unfamiliar, and ultimately not right for the job at hand. A franchise lawyer will more efficient and more capable of safeguarding your interests as a new franchisee.

 

When you work with a team of franchise lawyers who work entirely on fixed fees, you will inevitably save money and time. Not only is it a far less risky way of working with a legal team, but it should also allow for a strong client-lawyer relationship to develop. If your lawyer is not a fixed-fee lawyer, get her or him to provide you with an estimate of total costs prior to entering into any sort of retainer.

 

You need to able to satisfy yourself that you know everything there is to know about the franchise business before signing any franchise agreement. Have you learnt the market? Do you know who your competitors are? 

 

To ensure you will be able to earn money from the franchise business, check whether or not it operates on a territory basis. In other words, will you be operating your franchised outlet from an area in which no other franchisee within your network may lawfully operate? If you will have an exclusive territory, inspect the area first to examine the level of foot traffic and the number and size of competitors in that area.

 

You need to work out the costs, so contact you accountant to work out the projected costs including the lease and franchise agreement. This will let you more easily determine your potential earning capacity and future profits.

 

The lease term should always align with the term of the franchise agreement, whether it’s five or ten years. If your franchise term ends at the midway point of your lease, you’re in trouble. The same goes for losing your lease when you’re still operational.

 

Get in contact with current and previous franchisees, as they’ll understand the pros and cons of the business better than anyone.

 

Finally, get your hands on the disclosure documents afforded to franchisees under the Franchising Code of Conduct. These are a good starting point for effective due diligence.

 

How does the type of business work with your lifestyle? It’s not easy to get out of a franchise if, for whatever reason, you decide it’s no longer what you want. Have you the time and energy to invest? What about travel, and family? Consider alternatives before making such a big decision.

 

It’s also critical to look at your own abilities, and decide whether your skill-set fits with the type of business you are contemplating purchasing. For instance, if you have worked in restaurants and cafes all your life, perhaps buying a coffee franchise like Starbucks is a great idea, given your previous experience and knowledge of the space. That being said, just because you like cars doesn’t mean you should buy an auto-repair/mechanic franchise business. What extra training will you need? Can you afford (time and money) to do these courses? Is the cake really worth the candle? 

 

Matching the business purchase with your work experience makes more commercial sense, and will help to set you up for success.