3 Mistakes to Avoid to Reduce Your Franchise Buying Risks

For people who would like to own a business sans the stress of having to start from scratch, franchising is a great option. The brand is already established and there’s a strong marketing support and a network of supply chains to provide just everything you’ll need. However, just like all forms of businesses, franchising has accompanying risks too. To increase the odds of success for your future franchising venture, avoid these three franchising mistakes:

Not being realistic about your math

Assessing your financial capability, developing an accurate financial statement, finding a reliable financier, and making a proper loan request – these are just some of the things you need to ensure your franchise is financially viable. See to it that you have adequate funds to cover costs for the business, such as pre-opening costs and enough cash to operate until you break even, and of course, enough amount reserved for living expenses for your family.

franchising isn’t a one-time deal. You will need to invest over and over as long as the franchise runs. In the disclosure statement, you will find an estimate amount of the investment that may be required of you. Double this for extra allowance. If you’re not so adept at business accounting, hire a professional.

Not being wise enough to sense a rip-off

Losing your lifetime savings to scammers will scar you for the rest of your life but you can avoid this with vigilance and the right guidance. The number one red flag is the "get-rich-quick pitch, where the franchisor promises huge profits with little cost and effort. Another is when a franchisor requires upfront payment without getting the details clear.

Always research no matter how credible a company may seem and seek financial advice before committing to any payment. You may also take advantage of coaching services offered by some reputable franchise matching companies who can walk you throughout the purchase process.

Not seeking legal advice

It’s never safe to assume that you fully understand everything stated in the documents you are to sign. Review the agreement carefully and create a list of your concerns with the help of an attorney. Your legal advisor can protect you in the event future disagreements arise. When choosing an attorney, opt one with a good background in business law.

For more tips about franchise buying, check out Entrepreneur.com and Inc.com.

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