Buy a Franchise
Buying a franchise allows the buyer to start a new business, operated under a proven business model, using a recognized business name already known and trusted by consumers. Franchises are for sale in a wide range of industries, so there is likely to be a franchise for sale in the industry in which you already have experience. Investing in a franchise business requires the buyer complete a careful review of the industry, business model, and pricing of the franchise opportunity.
The steps usually required to buy a franchise include:
Choose the Right Franchise
Choosing the right franchise often begins with choosing an industry. Do you want to own a fast food restaurant or provide oil changes? Once you choose the industry in which you want to buy a franchise, review all the franchise opportunities being offered. A business broker or franchise broker can help you identify what franchise opportunities are available in your geographic region.
Review Franchise Disclosure Documents
After finding the franchise opportunities available in your area, contact the franchisors and request the disclosure documents of the franchise. These are documents all franchisors must prepare and deliver to prospective franchise buyers. Aside from reviewing these documents yourself, it is a good idea to have an accountant, attorney, and business or franchise broker review these documents for you as well. More well-known franchises will be more expensive and less well-known franchises will be less expensive. Franchisors may also exert some level of control over franchise owners, and the amount of control varies from franchisor to franchisor. The level of control should be examined when evaluating the purchase of a specific franchise.
When you have selected the franchise opportunity that you believe provides the best balance of notoriety versus price, and you believe the level of control from the franchisor will be reasonable, it is time to secure the financing you will need to purchase the franchise. If you have the cash to buy the franchise outright, also consider if you have sufficient capital to operate the business until it becomes profitable. If you are not a cash buyer, or you wish to supplement your cash position with additional capital for operations, financing may be found from private bank loans, SBA underwritten bank loans, and investor financing.
When you are ready to buy the franchise you have researched, the transaction will be completed through a franchise agreement, which is a contract between the seller and buyer of the franchise. The terms of the franchise agreement are supposed to be the same as the terms explained in the disclosure document, but it is always a good idea for a business attorney to review the franchise agreement before signing to ensure that there are no material differences between the disclosure documents and the franchise agreement.
Starting the Business
After signing a franchise agreement, the process of actually starting the business begins. Refer to the How to Start a Business section for the next steps.
Where to Start
Contact San Diego Corporate Law for a consultation, to discuss your current business situation, and to receive personalized suggestions for your business situation.