How can I be sure the information provided by a franchisor about its business is accurate?
answered by Vicky WilkesSenior Associate at Squire Patton Boggs (UK) LLP
Before investing in a franchise, a potential franchisee must be prepared to do some due diligence on both the franchisor and the franchise business.
A franchisor will typically put a potential franchisee in touch with other existing franchisees, who are likely to be the more successful ones. It’s therefore important to try and speak with other franchisees in the network, who the franchisor has not put you in contact with, to get a broader understanding of the business.
If it’s a new franchise you’re considering, with no or only a few existing franchisees, you should examine the franchisor’s pilot operation closely.
You can also verify the information provided by a franchisee by using information that’s publically available - for example, via the internet. Also, if the franchisor is a limited company, its financial history may be obtained through Companies House, while the British Franchise Association might be able to assist you if the franchise is registered with it.
Vicky Wilkes is a senior associate at law firm Squire Patton Boggs (UK) LLP, specialising in both domestic and international franchising.
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