The Franchisee needs to carefully consider the additional operational costs associated with running a franchised business. In the development of any business plan, it is essential the Franchisee grasp a complete understanding of those costs because those cost will ultimately eat into the profit margin.
We frequently deal with Franchisees who have signed complex agreements without obtaining legal/accounting advice or understanding their true cost obligations.
Accountants advising Franchisees may be asked to give certificates of advice to a Franchisor. We would recommend that such a certificate only be given after a thorough and rigorous budgeting and income analysis.
In some franchise agreements we have examined for retail food franchises the Franchisee could expect the following costs:
A Franchisee’s decision to enter into a Franchise Agreement should never be motivated by emotion or ego. Unless the figures stack up, a Franchisee will quickly find itself descending into a dark financial abyss resulting in the loss of the family home or other assets. A Franchisor will usually not make any representations about the profitability of the business and if they do the representations are usually heavily qualified.
We recommend the following:
• Have the Franchisor disclose all expenses and fees associated with the Franchise
• Check the figures of other Franchisees if they are available
• Negotiate for a relaxation of upfront franchise costs and or other costs under the agreement
• Conduct a 5 year budget plan on the basis that you will need to spend significant cash on a refurbishment
• Get Legal Advice from a Franchise Lawyer and Accounant
Contact LeaseFranchise director Evan Sarinas (07)47242969, email@example.com
This release is not intended as legal advice and all liability is disclaimed for reliance on it.
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