The process of buying a franchise

The process of franchising is a mutually beneficial one but requires careful consideration and efficient planning before the franchisor and franchisee embark on a relationship. The various steps involved in the formation of a franchise relationship can be briefly described as follows:

Step – I: This starts with the franchisor providing the franchisee with information on the company and investigates if the franchisee possesses the business characteristics to successfully manage a franchise. Step – II: Next, a disclosure document providing the bulk of information about the franchisor including a history of the franchise, description of the business, the fees that are to be incurred by the franchisee, obligations of the stakeholders, audited financial statements and a list of the existing franchisees is given to the franchisee so they can take legal advice Step – III: The most valuable information towards a franchise selection can be obtained from the existing franchisees. The prevalent attitude amongst the franchisees will help decide if the business is a soundly managed one. This investigation must be carefully and impartially conducted and the potential franchisee must gather as much information as possible during this phase. Step – IV: It is essential for the franchisee to review documents pertaining to the franchisor’s business plan, operations and analysis. This will help understanding the scope of coverage of the business. Step – V: At some point in the process of investigation, it is necessary to meet the franchisor and also the key personnel of the business in order to clarify any remaining doubts that may affect the purchase decision. Step – VI: This is the final step where a decision will be made by the franchisee regarding the purchase of the franchise.

The franchisor and the franchisee will benefit a great deal if these steps are borne in mind before entering into a relationship as this will lead to a structured and disciplined relationship.