So Many Choices

Watch Your Step

How to avoid 8 mistakes first-time franchise buyers often make

1. Losing sight of what you want
It's easy to lose sight of your goals when hit with the franchise hard sell. Know what you want, and avoid franchises that don't meet your criteria.

2. Getting in over your head financially
Franchises are expensive. There are upfront fees, equipment costs, royalties and more. Know how much you can afford to spend on start-up. Write out a business plan showing financial projections, and stick to it.

3. Not getting feedback
Seek people who can evaluate a company objectively. Visit existing franchisees as well as some who have left the system. Ask them what they like and dislike about the franchise.

4. Failing to read the fine print
You can't afford to ignore information that can help you make the right decision. It's essential to read the Uniform Franchise Offering Circular (UFOC) and other related documents carefully.

In the FranchiseZone... Visit our "How to" archive for everything you need to know about buying a franchise.

5. Being penny-wise and pound-foolish
Pay to have a qualified lawyer and an accountant read the UFOC with a fine-toothed comb. Skimping on professional fees now could cost you thousands later.

6. Buying in too early
Buying in to a new system can be a great way to get in on the ground floor. But some new franchisors haven't yet worked out the bugs and may not have name recognition. Act extra cautiously when considering a new franchise. Meet other franchisees and pay attention to the founders' business experience.

7. Falling for exaggerated earnings claims
If the franchisor's claims of profit potential sound too good to be true, they probably are. By law, franchisors' earnings claims must be backed by hard data.

8. Not checking the warranty
The franchise agreement specifies alternatives for getting out of a franchise. Review them carefully with your lawyer before signing anything.


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This article was originally published in the August 2002 print edition of Entrepreneur with the headline: So Many Choices.

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