How Do You Buy a Franchise?


Quick Answer

A person can buy a franchise by comparing two or more potential franchises, studying three-year percentages on the turnover, comparing prices, looking at the franchise size, watching the franchise in operation and signing a contract, according to The Wall Street Journal. Learning about the franchise is imperative before agreeing to a contract.

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Franchisees should study the customers of the operation in question, notes The Wall Street Journal. Talking to current and former owners is helpful, and visiting the location helps the applicant understand the size of the franchise and consumer activity. Asking two companies for offering circulars is a good way to pick the best deal. These papers are known as Franchise Offering Circulars, and the documents include such information as company revenue and what the franchiser expects from the franchisee. Percentage figures in the double digits are cause for concern, and the litigation section discloses a history of any legal trouble. A franchise system less than 50 units may have some unresolved bugs in the system, which may require more commitment on the part of the franchisee.

Applicants need to look through any expenses, such as training, equipment and advertising, explains The Wall Street Journal. Other factors need to be taken into consideration, including initial inventory, cash reserves and construction-related overhead of the store. An applicant may have some leverage before signing a contract for starting a franchise, such as removing unattractive provisions in the document.

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