Mcmurry & Swift, a leading Washington State Business Broker serving Puget Sound and western Washington

Buying a Franchise

ADVANTAGES:

Proven Idea, Management Assistance, Financials Assistance

DISADVANTAGES:

Medium investment, Monthly franchise fees, Less freedom in managing the business

In addition to the questions posed for purchasing an established business, the following are some of the issues the should be addressed:

  • What is the reputation of the franchisor?
  • What are the plans for future development and expansion?
  • How would you evaluate the quality of the product / services offered?
  • Would you buy the product or service on its own merits?
  • Will this product or service increase in demand as the years progress?
  • Is the product or service seasonal around your area?
  • How well defined is the sales area?  Do you have the exclusive right to the franchise in this area?
  • What is the sales potential of the territory?
  • Does the contract fully explain your understanding of the franchise agreement?
  • Did your lawyer approve the contract after he studied it in detail?
  • Are you able to terminate the contract if, for some reason, you have to?
  • What would it cost to terminate the contract?
  • Can the contract be renewed?
  • Can you sell the contract with the franchisor's consent?  Can you keep profits made from the sale?
  • Can the franchisor take back or terminate the contract at his option?  Under what conditions?
  • If the franchisor terminates the contract, will you be compensated for goodwill you have built up in the business?
  • Are your payments to the franchisor spelled out in detail?
  • Must a certain amount of merchandise be purchased from the franchisor?
  • Can you use your own suppliers?
  • Must you make a certain yearly sales quota?  Is it attainable?
  • Are you prevented from engaging in any other business activity for the duration of the contract?
  • Does the contract prevent you from establishing, owning or working in a competing business for a certain number of years after termination?
  • Does the franchisor provide continuing assistance?  Is it specified in the contract?
  • Are you and your key personnel required to go to a special training school?
  • Does the franchisor select the business site?  Is there a fee? Can you refuse the site?
  • Will the franchisor help with the financing arrangements?
  • What advertising and sales promotion assistance is provided?  What is your cost for this assistance?
  • Will the franchisor assist with an opening inventory?  Purchasing?  Inventory control?
  • Have you actually seen in operation and examined the company's accounting system, and all other systems and methods to which you will have to adhere?

Remember, a legitimate company welcomes a detailed investigation since they stand to benefit by it. Beware of the company that refuses to answer questions. Better yet, rely on the proven experience of a licensed business broker to help you avoid the pitfalls. There's no 'sure thing' in today's fast changing business world, but we can help. That's why you should call on McMurry & Swift.

Reasons for buying a business | Starting your own business
Buying an established business | Buying a franchise  | Buyer Groups

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