The first and the most important step in owning a successful business franchise is researching the franchise company.  With a variety of franchises for sale, doing your homework is extremely important. You must conduct the most expensive due diligence possible. Aden Hillsman, who purchased a Metal Supermarkets franchise four years ago stated “I conducted the most extensive due diligence anybody could.  My primary goal was to find a reason not to purchase the business”. 

The first thing most prospective franchisees do before purchasing their business franchise is to read the franchiser’s Uniform Franchise Offering Circular (UFOC). The UFOC offering prospectus contains a mountain of information.  Among the high points: 

• A description of the franchiser’s officers and their business experience.

• A summary of the franchiser’s bankruptcy and litigation history.

• A chart detailing the initial expenses franchisees are likely to incur in setting up a business franchise.

• The franchiser’s three most recent audited financial statements.

• A copy of the franchise agreement and related contracts to be signed.

Prospective owners need to know from the beginning what their role will be as a business franchise owner. They should try to find out where the franchiser is taking their company in the future.  Prospective owners need to know who the franchisers are and what they are providing.  What specific support do they provide?  Do they offer marketing services to get the phones to ring? 

Support from the franchiser is very important.  Franchise support can cut years off the learning curve.  This is one of the huge advantages of starting a franchise as opposed to starting from scratch.  The support and help you get from the franchiser will help you to get the business franchise up and running quickly. 

Perspective business franchise owners should contact an attorney and an accountant to help them evaluate the risks of the investment.  The devil is often in the details, and a franchise attorney can often help would-be owners sift through franchise agreements to evaluate the risks of the investment. Business franchise agreements are often one-sided, offering every advantage and control to the franchiser.  The standard contract, for example, stipulates that franchises must arbitrate in the franchiser’s home state.  Franchisees also can’t leave the system or sell a store without the franchiser’s say-so.  If they do leave they forfeit the store’s assets. 

Some experts believe that purchasing a business franchise is ultimately buying safety.  The statistics are glaring.  The odds of building a successful business on your own are very slim versus the high success rate of a business franchise.  Risk keeps many people from getting into business in the first place, and business franchising mitigates that risk. 

Some information from Franchising by the St. Louis Small-Business Monthly, May 2005 

Additional information and web page by Paul Susic M.A. Licensed Psychologist Ph.D. Candidate CEO Susic Psychological Consulting P.C.