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Thinking of Becoming a Franchisee? The Importance of Due Diligence


Becoming a franchisee can potentially be a very lucrative business opportunity. Many people throughout South Florida have successful used the franchise business model as an investment tool.  Of course, as with all business opportunities, there will always be risks involved. As such, it is critically important that prospective investors engage in a comprehensive investigation and review process before committing their money to franchise opportunity. Here, we provide three of our top tips to help you assess an opportunity before investing. For answers to any specific franchise law questions please contact our experienced West Palm Beach franchise law attorneys today for immediate legal assistance.

Three Things You Should Do Before Investing

  1. Speak to Current Franchisees

It is a best practice to speak to at multiple current franchisees before you actually commit your resources to an investment. Investing in a franchise is a big deal, and the last thing you want to do is to jump into something before you are truly ready. By speaking to other franchisees, you will be able to get a far better perspective on how the process works and what your day-to-day life as a franchise operator will be like. This will allow you to decide if the franchise investment opportunity is right for you. Please do not miss out on the chance to contact other current owners prior to investing. Additionally, you should be well-prepared with specific questions before taking a meeting with a current franchisee.

  1. Understand the Market

Prior to investing, prospective franchisees must understand the economic climate and overall market conditions. This means knowing:

  • The brand;
  • The business model;
  • Your competitors,
  • Your territory; and
  • The local economy.

Every small issue matters. One of the biggest mistakes that franchisees make is getting into a business without thinking about the economic conditions that they will face. You must be honest with yourself and ensure that you are selecting the best available business opportunity.

  1. Live By the Numbers

When it comes to investing in a business, above all else, the numbers matter. While the raw numbers cannot tell you everything that you need to know, the hard data will give you objective information that you must take in account. You need to know the numbers in detail. Some questions to consider before investing include:

  • How much revenue can you expect after your first year?
  • How much revenue will you need to make to turn a profit?
  • How much are the royalty fees?
  • What are the trends for the business?

These are just a few of the many questions that you should have answers to before you sign a franchise agreement.

Contact Our West Palm Beach Franchise Law Attorneys Today

Entering into a franchise agreement is a major investment and you should not go forward with it until you have completed a thorough review of the business opportunity. You can protect your legal rights by working with an experienced attorney early in the process. For franchise law assistance, please call our team today at 561-291-8298 to request your free initial consultation. At Pike & Lustig, LLP, we represent franchisees throughout Southern Florida, including in Broward County, Palm Beach County and Dade County.

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