Any potential franchisee should begin their research by reading the offering circular, Inc. magazine writes. Franchisors are required by the Federal Trade Commission to supply franchishees with a Uniform Franchise Offering Circular that provides pre-purchase information on items such as financing arrangements, litigation history, the designated area of territory and sales figures, among others. Individuals should make sure to carefully read this over, write down any questions for the franchisor and identify sections that should be covered with a lawyer.
Next, franchisees should create a list of questions to ask current unit owners. These individuals are the best equipped to tell prospective investors the ins and outs of being part of the system, without glossing over any of the difficult areas.
At the end of each week, franchisees should check their level of interest - is it growing or declining? If interest is still high, they should proceed forward.
In week two, prospective buyers should revise the list of questions they created in week one for franchisees. If, after interviewing eight to 10 current franchisees, buyers have gathered similar answers to all their questions, it is likely they have learned all they can. But if any new questions came up as a result of the interviews, add those and investigate.
Additionally, buyers should add any new queries to their list of questions for the franchisor. At the end of week two, prospective franchisees should call the franchisor with this list. They should make sure to take thorough notes.
Week three should begin with three or more visits with franchisees. Buyers should consider what they have learned thus far and develop more complex questions. "During these visits, you are asking yourself these unspoken questions: Can I see myself doing this business? Will I like it? Is it what I have been looking for?" the magazine writes.
At this point, franchisees are entering the final stages of the researching process. Buyers should meet with lawyers to review the offering circular and franchise agreement, as well as with an accountant. to go over the strength of the franchise system.
The final thing a buyer must do is visit the franchisor's office. While company officers will be sizing up the buyer, he or she must be evaluating them as well. In the end, franchisees should trust their gut feelings and decide if these are the type of people they want to work with.
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