Franchise Buying Guide

Now You're Cooking

Talk to Professional Chefs
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

If you're serious about being in business, you'll need a good accountant and an experienced attorney on your team. Your accountant will perform an essential function: helping you review the financial statements presented in the UFOC and using the cost projections in Item 7 to help you create your own projections and break-even analysis. Where serious dollars are concerned, you can't afford to miscalculate the capital needs and potential return on investment of your new business.

Your attorney will advise you on the franchise agreement, your lease and any ancillary contracts. These are perhaps the most complicated legal obligations you'll encounter as an entrepreneur. The franchise agreement often runs more than 50 pages in length and is not required to be presented in plain English. After all, this contract conveys trademark rights and complex know-how, appoints the right to operate a franchise unit, details the conditions of renewal, specifies fees to be charged, promises services, imposes the obligations to comply with the franchise system, addresses the right of transfer, and tackles the always-difficult topics of termination conditions and post-termination obligations. And that's before it gets to the "boilerplate" provisions of indemnification, dispute resolution and independent contractor status. Stretch these topics to apply over a five-, 10- or 20-year relationship that's bound to change during that time, and you start to get an idea of the agreement's complexity.

This is no time for a do-it-yourself, cursory review. Neither is it time to consult your niece or nephew who happens to be a first-year law student. Find a good attorney with solid experience in advising small businesses who is comfortable reviewing a franchise offering.

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This article was originally published in the January 1999 print edition of Entrepreneur with the headline: Now You're Cooking.

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