FRANCHISEE TEST
Still thinking about buying a Franchise? Here are some steps to follow…
- Complete the Royal Bank’s Franchise Assessment Tool
- Read the Canadian Franchise Associations Disclosure Document Guide
- Call all existing Franchisee’s and ask any questions you may have and see if they are happy, ask for a face to face meeting to see their location
- Ask how many Franchises have closed since inception. Make sure that all past Franchisee’s are on the list – not just in the past year
- Call all past Franchisee’s and find out why they are no longer in the program
- Ask how many Franchise’s have re-sold in the past 5 years and contact past owners
- Make sure that the Financial Statements are Audited – not Notice to Reader or Review Engagement – there is a difference
- Pay particular attention to your ability to sell your Franchise
- Pay particular attention to renewal terms and territory obligations
- Pay attention to the term of the Franchise Agreement to the term of your lease, they should match if possible
- Is your Franchisor on the Head Lease (skin in the game) and subleases to you or are you on the Head Lease? If not on Head Lease ask why?
- If your Franchisor is in Litigation, find out all the details and talk to that Franchisee not just the Franchisor
If the Franchisor claims they have done their Due Diligence that does not mean that you don’t have to. On the contrary! It is very important that YOU do all of your Due Diligence on the Franchise Program so that you are confident that you are making the right business decision.