Franchising Due Diligence A simple strategy

If you think franchising is a good way to get into business you need to do due diligence, but how. Most franchisors will tell you, to do your due diligence, that is do your research, see a lawyer, a solicitor , get them to review the documents for you, ring around and speak to current operators, and they will give you a few suggestions of who to call.

Several Problems with this are with legal advice -
MOST lawyers have no idea about franchise agreements, you need to find a specialist that supoprts and understands the tricks and traps of the industry. I know more about these agreements through my experience than anything my lawyer told me. In fact my lawyer was wrong about many things. The point is I paid good money for him to review the contract and trusted in his expertise. Forget it, so much for legal advice.....franchisors know that it is no threat to their sales for you to get legal advice as the chances of you finding someone that really knows about the ins and outs of the business is slim -
So for this part of due diligence find an expert lawyer in franchising.

That would be your best step, the next thing the franchisor tells you is to phone existing owners and they will recommend a few. Here is what to do.
1. Do not call any of the ones they have told you to call
2. Of the remaining ones, phone 80% of them, not 2 or 3 ask ALOT of questions
If there are 110 stores, they gave you a list of 10 to call, ignore those, then call 80% of the rest that would be 80 stores.

That is alot of calling, but this is your investment we are protecting. Once you have done that, your final step is more important than the first 2. This is where the truth will be revealed.

Ask thr franchisor for a list of names and numbers of previous franchisee's. This should be ones who have closed down OR sold. You want to speak to the original owners. It will take a brave franchisor to do this. However if they DO, you can get some real answers...... If they don't give you this list, then they ARE not trustworthy, don't believe them, walk away, if they say no one has closed or sold, that is a LIE so walk away.......

Asking existing owners is flawed because NO ONE will criticise what they perceive to be their own business while they are still running it, not matter how bad things are. Real due diligence is speaking to previous owners

Ask ex owners, what their thoughts are -
Why did they leave/close/sell?
Did they leave on good terms?
Did they get support from head office?
Are they now better off financially or worse off financially? Would they do it again?

Here you will find out the truth about franchising and the big fraud that it is

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