The Niceties of Franchise Due Diligence
Many franchise offerings are just fine for a productive future, and are worthy investments. Others are not. Which is which? Among those that are bona fide investment worthy opportunities, which are compatible with your own capabilities and needs? Needs include not only revenue issues, but your personal “fit” issues. That means things like Who are you? What are your expectations and tendencies in relationship management – how well do you take orders you might wish were different? What are the real reasons you are looking at franchise investment?
Ultimately, there is the question of vetting the truthfulness of what is said to you in the marketing brochure, the FDD and the pitch you will receive on discovery day. Most lawyers who advise franchise investors can’t answer the question Is this a good investment. The best they can do is to say It could be if what they tell you is true.
Selecting your due diligence advisor is extremely important. Every franchise agreement provision is a statement of economic risk. Ask your lawyer if s/he can explain not only the legal issues, but also the economic risk profile of the offering. If the lawyer balks at that, you need to look further for help. Get on Google and do a search on “franchise lawyer”. Call the lawyers who come up in that search. No matter where they may be located. Location of counsel is no longer important. Competence is the most important issue.
Ask every lawyer you call what their experience has been in advising people who are potential franchise investors. Ask them how much of their practice is focused on franchising issues. Ask them whether they are capable of providing business counseling as well as legal counseling. That is how you get to the resource you really need, because that is what you really need in terms of scope of available expertise.
You can find a good franchise investment opportunity if you know how to sort them out. If your personal experience does not include a lot of sorting out franchise investments, you aren’t competent to wing it yourself, no matter how many degrees you have or what you did in your work history. Franchising is a unique field of endeavor with a unique risk profile.
Remember that the goal is to invest in positive reality, not abstract notions and hype. Good luck.
