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Killer Due Diligence for Prospective Franchisees

Richard Solomon has an instructive view about franchising history, and concludes:

"There is only one way to avoid investing in this kind of abusive franchise system.

Pre investment killer due diligence by experienced franchise lawyers who are not afraid to vet the deal from a business as well as a legal perspective is simply indispensible.

The money you save buying incompetent pre investment due diligence that does not address these outcome determinative business issues is chump change compared to the loss of your total investment and a trip to the bankruptcy court."

Richard details why the legal response of dissonant franchisees in the past no longer works.

In brief, Richard argues franchisees unhappy with their franchisor can no longer attempt to go independent, in the past anti-trust tying laws and ineffective non-competes would help the franchisee association.

This historical analysis is interesting, but I think that Independent Franchisee Associations have tools at their disposal to both prevent the dilution of the brand, and control franchisor abuse.

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Full post as published by Misleading Advertising Law on January 21, 2009 (boomark / email).