Due Diligence

Q: I recently received a UFOC that a bold print warning on the front page from the state of Illinois, referring to the large numbers of transfers, terminations and closings. They seem to keep about the same number of franchises year after year, but the total number of transfers, terminations and closings each year equals between 1/2 and 1/3 of the total number of franchises. I am leery of doing business with them, but I am curious as to what may be going on there. Any thoughts?

A: The only thing you can do is to do a flawless job of investigating this business.

The beauty of a franchise is that you can do your research by simply contacting and visiting existing locations.

You must do so. Go to these locations and speak to the franchisees directly. They will undoubtedly be the best resource for you to do determine what is really going on. Many franchisers have just one agenda and that is to sell you a franchise. This one sounds like a prime example.

While franchises may be a good venue for some people, you’re far better off to buy an existing franchise resale as opposed to building one from scratch.

This way, you get the best of a franchise and an existing business with historical data, built in customers, infrastructure, and an immediate cash flow.


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