We're looking to acquire a franchised business. Any tips or due diligence processes that may vary from acquiring a non-franchised business?
ANSWER:
The due diligence is the same for any other comparable business; however, the following are some franchise-specific issues.
You will want to thoroughly review the franchise agreement, and you should also have it reviewed by a good business lawyer who specializes in franchises.
Before thinking about signing a franchising contract, you should be able to answer the following questions:
Does the franchisee have an exclusive territory?
- Is the franchise transferable? How long is left on the existing franchise agreement?
- Is the franchise renewable? For how long?
- Is it renewable at the franchisor's or the franchisee's option?
- What am I getting for the franchise fee? Accounting systems? Operating systems? Lower prices on supplies?
- What exactly am I buying? Am I buying the right to use the name? Is the building part of the deal, and do I own the real estate? Will I be paying rent?
1 comment:
One should purchase a franchise according to his budget, interest and location. He should know all the details of a company with which he is going to sign a contract. He should have proper knowledge about the renewal agreement. Thanks for sharing this amazing post with us.
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