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When To Say No To A Franchise Opportunity

When To Say No To A Franchise Opportunity

By FranchiseKing, Guest Blogger
Published: February 16, 2017

When you first start looking at franchise opportunities, you’re not really focused on the yes or no decision you’ll have to make when and if you find an ideal one. You’re focused on the search.

The search for the right franchise to buy takes longer than most people expect it to. It’s more like a marathon than a sprint. And if you really want to be your own boss, I have confidence that you’ll take the time needed to do it right.

When You Finally Get There

There,” in this case, is when you’ve landed on one particular franchise opportunity, and feel that you’ve done the proper in-depth due diligence required to make a yes or no decision on buying it. A decision that may not come easily. Big decisions like becoming the owner of a business are difficult ones to make. I’ve always said that looking for a franchise and buying a franchise are two totally different things. You’ll see what I mean if you get to the yes or no point.

When Should You Say No?

When it comes to making a yes or no decision, I always think of the song Kenny Roger’s famously sang titled, “The Gambler.” Do you remember this line?

You've got to know when to hold 'em, know when to fold 'em.”

When you’re getting ready to make your decision on a franchise to buy, you really do need to know when to “fold ‘em” ...when to walk away. Here are a few examples of when you should say no.

1. FDD Warnings

The Franchise Disclosure Document (FDD) contains pages and pages of important information. Important facts. And sometimes, red flags are contained in these facts.

For example, if you see that a lof franchisees are no longer franchisees-in other words, they’ve closed their businesses, there may be a problem. To find out why franchisees have left the system, you need to do a couple of things.

First, call your franchise development person. Share what you’ve found, and ask why so many franchisees have left.

Then, call a few existing franchisees-maybe the ones who you’ve already talked with when you did your research, and ask them what they’ve heard about the franchise business closings. Maybe they knew a few of the franchisees that left, or have “heard things.”

If (after talking with corporate and some of the existing franchisees) you don’t like what you’ve heard, or something you’ve been told isn’t sitting quite right, find another franchise opportunity.

2. Longevity

Some of the people I work with are attracted to franchise opportunities that are suddenly “hot.”

Getting involved with a hot segment of franchising may not be a bad thing. It’s different than buying a specific franchise opportunity that may turn out to be a very short-term business. Here are a few examples* of franchise concepts that were once hot, and are now not.  

If you’ve been looking at a franchise business opportunity that may turn out to be a short-lived fad, or a badly thought-out business model, you need to say no.

3. Your Lawyer

One of the reasons I tell every client I work with that they must hire a franchise lawyer is because franchise lawyers keep up with the franchise industry. Another reason is because they tend to keep up with the constantly changing laws governing small business and franchising. They’re “in the know.”

But the best reason for hiring a franchise attorney is protection. You’re paying them to protect you and your interests.

Today’s franchise lawyers have gone through hundreds of FDD’s and hundreds of franchise agreements. They know what to look for in an agreement. They know what a “typical” agreement contains. They also know what an agreement shouldn’t contain.

If your franchise lawyer tells you that she’s “never seen anything like that in an agreement before, and I wouldn’t recommend that you sign it,” don’t. (Unless the franchisor agrees to change whatever it is question and your attorney is comfortable with the change.) Personally, I always take to heart what an attorney tells me. You should, too.

Important: You always have the option to get a second legal opinion. There are a lot of good franchise lawyers around.  

It’s Your Choice

The bottom line is this: You always have a choice. You don’t have to follow my advice. You don’t have to follow your lawyer’s advice.

Because at the end of the day, it’s your money you’re putting on the line. That means that you get to decide yes or no on the franchise opportunity you want to buy.

*Non U.S. Government website

About the Author:

Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.