, Advantages & Risks of Purchasing a Franchise, Abrahams Kaslow & Cassman LLP | Attorneys at Law


Are you considering purchasing a franchise business? If so, here are some things for you to consider.

There are many benefits to purchasing a franchise business. One of the biggest advantages of owning a franchise is the use of the franchisor’s company brand name. A franchise with an already established product or service carries the benefit of a customer base who recognize and prefer the franchise.

Another benefit of purchasing a franchise is that someone has already done the work to establish a viable business system. As a result, franchisors may help franchisees with business training, finding a location, and providing advice on management, marketing, and personnel. A franchise system can also offer franchisees favorable access to vendors and coordinate relationships with suppliers allowing franchisees to purchase products at volume discounts with increased product quality, consistency, and availability. These benefits are ordinarily not available to a small business owner.

There are also certain risks common to purchasing a franchise. Some franchises may require a large initial investment into the franchise business. There may also be significant royalty fees and expenses related to training, equipment, and property related to the franchise business.

There are specific things you can do as a potential franchise buyer to insure you are making a good, well-thought-out business decision. The first step to becoming a franchisee requires a thorough review of the Franchise Disclosure Document (”FDD”) received from the Franchisor. The FDD is a legal disclosure document that is required to be given to potential franchise buyers before any sale.

The FDD is designed to give prospective franchisees useful background information about the franchisor, franchise system, the franchisor’s business and financial information relating to the franchise business, and the franchise agreement to enable a potential franchisee to make an informed investment decision. It is recommended that a potential buyer of a franchise business consult with its attorney and financial adviser or accountant to evaluate the legal and financial risks and benefits associated with the franchise system.

A potential buyer of a franchise should also conduct their own due diligence before signing a franchise agreement and making the initial investment required to become a franchisee. This includes talking to as many franchisees of the business as possible to learn how to successfully operate the business and know what kind of support you can expect from the franchisor.

An AKC Law Franchise Attorney can assist you in understanding and evaluating the information disclosed in the FDD and the terms of the franchise agreement. Contact [email protected] for more information.