Legal Advice Prior to Buying a Franchise
Are you interested in buying a franchise in the U.S. or in a foreign market? I help entrepreneurs decide if buying a franchise is a good fit. As a potential franchisee, there are important issues to consider prior to your purchase. I provide comprehensive legal help to prospective franchisees, helping them decide if buying a franchise is a wise move.
Are you interested in buying a franchise in the Washington, D.C., area or elsewhere in the United States? Please contact me, Mario L. Herman, today to schedule your consultation. As an experienced franchise attorney, I can help you decide if buying an American franchise is a good fit.
Look Before You Leap
Due diligence is crucial for major financial decisions. Before signing a contract, securing a loan, and cutting a check, you should:
- Review the franchisor’s litigation record contained in the franchise disclosure document (FDD);
- Scrutinize promotional marketing materials provided by the franchisor and compare these with representations made in the FDD;
- Contact current franchisees listed in the FDD and inquire whether they would purchase their franchise again (though current franchisees will be reluctant to speak negatively about the franchise);
- Find former franchisees (sometimes a difficult task) and inquire how many left the system and why (keep in mind, former franchisees may be inclined to speak negatively about the franchise);
- Independently research the franchisor and their concept to determine the strength of their trademark, the financial performance of company-owned stores, and whether the franchisor is a “professional franchisor”—that is, a verifiable expert in the concept being franchised;
- Call the Federal Trade Commission (FTC) in Washington, D.C., to determine whether complaints have been filed against franchisor;
- Call franchisee associations (e.g., the Franchise Equity Group (619-593-6553) and the American Association of Franchisees and Dealers (800-733-9858)) for additional information; and
- Determine which attorneys formerly have represented franchisees in the network, and inquire about their client’s problems with the franchise.
International Franchise Opportunities
Investing in a franchise concept that has been developed and proven in another country can be a wonderful business opportunity… or a financial disaster. When looking to buy a franchise, it is important to consider that the franchisor does not necessarily operate with your best interest in mind. The franchisor makes its money whether you do or not.
Prospective franchisees of international franchise opportunities should thoroughly investigate international franchise opportunities, reviewing the principals of the company, the track record and financial strength of the U.S. master and foreign-based franchise company, the litigation/arbitrations that the companies have been involved in, and the track record of success in its existing franchises.
Caveat emptor (let the buyer beware) applies to this day in international franchising. Due diligence is an important part of any business dealing. Protecting yourself against undisclosed information is something that you should keep at the forefront of your thoughts and efforts. Without the necessary research, you can find yourself in a binding situation that has drawbacks that you never imagined.
Contact Mario L. Herman
Contact me, Mario L. Herman, for an attorney experienced in franchise litigation and contracts, to ensure you don’t overlook any aspect of buying a franchise that deserves further consideration.