Monday, October 29, 2007

Franchises: What to Watch For

This article appeared in yesterday's online version of the Wall Street Journal. Misleadingly titled "Four Danger Signals When Franchising," (it ought to read "When Buying a Franchise"), it re-visits territory that we've explored in this blog over the years. Nevertheless, this is practical information to review with our clients.

It's a brief article, and it highlights three specific issues:

1 - Lots of litigation and closures - Noting that franchisors have an obligation to disclose any current or past litigation in the franchise offering circular;
2 - Too many bad reviews - Recommending that potential buyers interview a variety of current owners of the franchise to get their honest take; and
3 - High-pressure sales tactics - Which ought to speak for itself.

A lot of this is common sense, but I've heard many stories from all of you over the years about clients who bought a franchise first, then asked questions later. That's the wrong order to do things.

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