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What are some red flags to look for when buying a franchise?

On Behalf of | Mar 21, 2019 | Mergers & Acquisitions

Many entrepreneurs in Broward County look at the purchase of franchises as a relatively safe bet. As the logic goes, buying an established brand cuts out a lot of the legwork associated with purchasing an unproven entity. That doesn’t mean that franchises are without risks, and Forbes explains how to identify potential red flags.

Poor feedback from other franchisees

As a part of your due diligence strategy, take some time to talk to other franchisees about their experiences. If you’re receiving a lot of negative feedback, it’s best to take these concerns seriously. In the very least they signal a poor communications model between franchisor and franchisee, which is sure to make the working relationship much more difficult.

The discovery day presentation is lacking

Most franchisors give a presentation on discovery day, which is when you’ll finally meet in person to discuss the details of the business being offered. It stands to reason that the franchisor would want to make the best impression possible during discovery, which takes quite a bit of planning. A rushed or poorly organized meeting could be an indicator of this person’s work style, which will directly affect you if you choose to go through with the purchase.

The offer seems too good to be true

Every business concept has inherent flaws, no matter how promising it may be. Recognizing these flaws is crucial to work through them, and when a franchisor is unwilling to have a frank discussion about a potential issue it could be a very bad sign. A strong, emotional response to constructive criticism before the purchase could paint a picture of what’s to come once you enter into a professional relationship with the franchisor.