· Ask how many owners have operated the franchise in its current location, and over what period of time. Too many owners in a short period of time may show that either the franchisor isn’t offering enough support or that the location doesn’t work for that business. Find out why the current owner wants to sell.
· Find out what will be required should you buy the franchise, then later decide to sell. Can you only sell after a certain amount of time? Can you sell the franchise to anyone of your choosing? What restrictions are there?
· Find out how many franchisees sell out each year company wide? If possible, find out who those people are and contact them. Make sure that company owned outlets are not actually failed franchises that have been bought by the company. Also, find out how many franchise agreements were terminated by the franchisor. A large number of terminated agreements may indicate a problem.
· Talk to current and former franchise owners. Be wary of franchises that the company suggests for you to contact. Also, double check the information the franchise owner gives you with the company, and double check the information the company gives you with the franchise owner. This will help to ensure that everyone is being honest.
· Read the company’s disclosure document. This document should tell you business background, litigation history, bankruptcy history, costs, restrictions, grounds for termination of the agreement, training and support information, advertising information, earnings potential, financial history, and current and former franchise information. Make sure you read the entire document and that you understand it. Give a copy to your attorney as well.