Before You Sign the Franchise Agreement - The company’s disclosures may change between the time you receive the disclosure document and the time you sign the franchise agreement. For example, the company may have updated its disclosures; it is required to do that at least annually after its fiscal year ends.
You have the right to ask for a copy of any updated information before you sign the franchise agreement. An updated disclosure document may indicate the filing of new suits by or against the franchisor, changes in the franchisor’s management team, new financial data, and more current financial performance data, among other information.
Accountants and Lawyers - In addition to reading the company’s disclosure document including any updates and speaking with current and former franchisees, consider talking to an accountant and a lawyer. An accountant can help you understand the company’s financial statements, develop a business plan, assess any earnings projections and the assumptions they’re based on, and help you pick a franchise system that is best suited to your investment resources and your goals.
A lawyer can help you understand your obligations under the franchise contract. These contracts usually are long and complex. A contract problem that arises after you have signed the contract may be very expensive to fix if it can be fixed at all. Choose a lawyer who is experienced in franchise matters, but rely on your own lawyer or accountant for a recommendation, rather than the franchisor’s recommendation.
Banks and Other Financial Institutions
These organizations can offer an unbiased view of the franchise opportunity you are considering. They should be able to get a Dun and Bradstreet report or similar financial profile of the franchisor.
Better Business Bureau - Check with the local Better Business Bureau (BBB) in the city where the franchisor has its headquarters. Ask whether there are complaints on file about the company’s products, services, or personnel. Several states regulate the sale of franchises. Check with the state office that regulates franchising it may be the Office of the Attorney General for more information about your rights as a franchise owner in your state.