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Investigate the system and the business you are buying
Becoming a franchisee means having to follow most of the franchisor’s rules for how the business has to be run, even if the franchisee doesn’t always agree that those rules are best for their business.
Franchisees also take on the financial risk of the business. This could mean having no income if the business is unprofitable, or even being unable to cover the costs of running the business.
Here are some helpful steps potential franchisees should take before signing anything. These will help make it easier to understand what franchisees are agreeing to when they buy a franchise. Included in this information is a handy list of questions to ask the franchisor and other franchisees.
Watch our franchising videos
We have some short videos that help explain some of the risks of franchising. These are available in English, Hindi, Chinese simplified and Chinese traditional.
Key steps in buying a franchise
There are some key steps you should always take to know the risks before signing a franchise agreement or paying money. This includes understanding key documents, talking to other franchisees and ex-franchisees, and seeking professional legal, accounting and business advice from franchising experts.
Supplier restrictions
Some franchise systems require their franchisees to buy certain products from them or their specified supplier. These are known as supply restrictions. You may have no choice about where to buy some products.
Price vs. costs
The upfront price of a franchise may seem like a good deal, but there are also costs that you may have to pay to set up and run a franchise. It’s important to understand the total costs you may have to pay.
