… Deciding to purchase a franchise or private ownership of a business, recommend hiring an attorney. This will be very helpful during negotiations, and likely prevent any unexpected costs or liabilities.
According to federal regulations, a franchise must provide full disclosure at least ten days before signing a contract, and State laws have further regulations regarding franchise agreements.
Before signing a franchise agreement, you should evaluate: Track record of franchise, cost to purchase, territory will be exclusive, what products will be sold, any services provided by the franchise, past historical data related to future profits, and full disclosure of any related bad news, regarding the history of the franchise (fraud, embezzlement, bankruptcy or unfair business practices).
Private ownership should evaluate, previous financial records, including tax records from previous quarters and years. Also, examine all expenses, including salaries, pension funding obligations, medical expenses, rental agreements or leases, and determine what are fixed and variable costs.
Consider hiring an independent auditor, and consul with someone that has experience, purchasing or selling the business of interest. Ask the employees their opinion, how well the business is operating, and ask for suggestions that will improve the business. Inquiry at the city and state government agencies, for any business violations, including the department of health, and fire code enforcement.
Purchasing any type of business, the new owner should strive to enhance the business operation, both productively and profitability, to succeed.
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