A financing option often overlooked that is...
You wouldn’t agree to surgery before talking to a doctor, and you shouldn’t buy a franchise before talking to several professional advisors. The doctor will examine you and look at your X-rays to recommend a solution, and professional advisors will interview you and review the pertinent franchise documents to help you make a decision.
Your franchise advisors should almost always include a franchise attorney (that is, an attorney specifically trained in franchise law, which probably excludes your brother-in-law and your divorce attorney, as good as they may be), and an accountant who is familiar with the concept of franchising (which excludes most accountants). Other advisors may include franchise brokers (independent sales representatives for one or more franchise brands), franchise coaches, and real estate experts (for selecting locations).
It’s important to keep in mind that a franchise advisor is not a doctor, and the best an advisor can do is – well, advise! Bottom line: Advisors don’t want to be on the hook for telling you what to do. In the event you fail and decide to file a lawsuit, the advisor doesn’t want to be named. Thus, advisors will give you their advice with no strings attached. You’re on your own after you pay their fee.
Now if you are thinking, “Then what good is it to consult with an advisor?” please think a little longer. Granted, they won’t tell you what to do (and you should be suspect if they do!), but they will point out possibilities, pitfalls, and problems.
- A franchise attorney can tell you why the franchise agreement isn’t in your favor (and it never will be), and highlight the small print: You didn’t know there was a training fee in addition to a franchise fee? You didn’t know you’d have to open a second unit within two years? You didn’t know you’d have to remodel your store every three years?
- An accountant can show you financial benchmarks for similar businesses revealing how much revenue they generate, how much they pay for rent, supplies, personnel, etc. What’s left over, after paying royalties, is your take home money. A good accountant will tell you financial information about the franchise that the franchisor will not reveal.
- A franchise broker can itemize the pros and cons of several businesses and help you decide what will make sense for you.