An existing location needs its own investigation

Separate the business from the franchise rights

A seller may be offering equipment, lease rights, customer relationships and operating history. The franchisor controls a different set of questions, including transfer approval and the agreement the buyer will be required to sign. Do not assume that buying a location automatically transfers every right the seller currently holds.

Ask for a transaction map showing which party must approve each step. Include the seller, franchisor, landlord and any lender. Identify conditions that must be satisfied before money becomes nonrefundable. Have transaction counsel examine how these conditions work together.

Test the operating evidence

Review financial and operating records through a secure process with an accountant. Reconcile reported receipts with supporting records and identify expenses that may change under new ownership. The seller’s labor, premises arrangement, financing and relationships may differ from yours. Historical results do not establish your future income.

Investigate equipment condition, maintenance, staffing, customer concentration and any obligations that continue after closing. Ask whether renovations, new technology, training or changes in approved suppliers would be required. These questions concern the particular location and cannot be answered by a national brand overview alone.

Keep the closing plan connected

A business can be attractive in isolation while its lease, franchise term and financing timetable do not align. Ask advisers to review the complete sequence, including access to records, approvals, training, handover and working capital. The appropriate next step is documented diligence, not reliance on the fact that the doors are already open.

Put it on paper

• Identify precisely what is being purchased.
• Verify transfer conditions and the proposed agreement.
• Examine location records with independent advisers.

Continue with the franchise research checklist, our FDD guide, and the research directory.