Franchising Can Be Risky Business

September 28, 2012 by Cris | 0 Comments

Sydney Morning Herald (blog):

Question: I am currently working as an accountant but I am looking to buy a franchise in the hospitality industry (a cafe). What should you look for before making a commitment to purchase a business? What can I do to minimise the risk?

Answer: I am not sure whether you are considering buying the franchise as an investment or whether you intend to be actively involved in running the business. In either case you would first need to do your due diligence on the business you are considering. As you are an accountant you should have a pretty good idea on how to check the financial viability and financial history of the company and in coming to a reasonable valuation of it. So I will not spend further time on these themes.

You will need to assess the likely future earnings from the business and whether these represent an attractive rate of return on the funds you will be committing to it. Read more.

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