Buying a franchise is one way to work for yourself. You’re buying a system that someone else has developed. It might be great, but it might also limit your choices about sales, training, vendors, and advertising.
Know that some franchise agreements last for five or 10 years. Before you buy a franchise, ask yourself:
- How long do you want to stay in one area?
- Do you want to be in one business that long?
- Will your skills, education, and experience help you manage the business?
- Can you set your own hours of business and choose which vendors you buy from, or does the franchisor decide for you?
Get financial and legal advice before you commit. Talk to a lawyer to understand your legal obligations. Ask the lawyer to review the disclosures and explain the terms of any franchise agreement. Have an accountant develop a business plan and assess your earnings projections.
- How much money can you safely afford to invest?
- Do you need financing? If so, where will you get it?
- Do you need a specific minimum annual income?
Make sure the paperwork is in order. At least 14 days before you sign a contract or pay any money, a franchisor must give you the Franchise Disclosure Document (FDD). It spells out key details about the business and your relationship.
- Your state may have disclosure laws meant to protect franchisees. Contact your state attorney general’s office if the FDD doesn’t include information about that.
- If a franchisor doesn’t give you a copy of the FDD — or if you don’t have time to thoroughly review it — think twice before buying a franchise from them.
