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Dave Thomas's Nine Tips for Investigating a Franchise : Tip #1

Sean Kelly updates Dave Thomas' Tip #1 about investigating a franchise, over at Allbusiness.

"Dave's Tip #1:

Read everything you can about the franchise. Go to the library and read through the trade and business magazines. If you have a stockbroker, call him or her up and see if they have any investment research on the company. Ask for the annual report from the company. "

Sean suggest that the modern update is:

"Dave raises an important point for your due diligence: don't just research the franchise opportunity, research the entire company, its strategic plan, its goals, and understand how the franchisees fit in the big picture.

Is the company financially secure?

Is it likely to be sold in the near future?

Is franchising and franchisee support a priority for the company, or excess baggage?

These are important and often overlooked questions.

Most magazines and websites promote the rosy picture that sells franchise advertising pages, but the truth is out there. Now get digging... "

These are all good ideas, but there is a legal trap.

Unless this information is disclosed in the UFOC or FDD, you are unlikely to be able to rely upon it if it turns out to be false.

Use this information to screen out candidates; don't believe that you build a positive case for a franchise based on the answers to these questions.

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Full post as published by Misleading Advertising Law on June 19, 2008 (boomark / email).