Owning your own business means living the dream right? Being
your own boss, flexible hours and achieving success in your chosen
Purchasing into a franchise or small business can appear, at
first glance, as a relatively simple and risk-free way of taking
control of your career. However, the rush felt by prospective
business-owners often leads to overlooking a critical aspect prior
to starting up - due diligence, and at the end of the day, the buck
stops with you.
Recent research released by Griffith University illustrates the
danger of blindly taking the plunge - critiquing the level of due
diligence exercised by prospective business-owners as unrefined and
inexperienced when it comes to understanding the challenges
associated with such a venture.
A key issue addressed by the University was the failed
expectations of franchisees who relied upon verbal assurances. This
reliance has lead to purchasers being unpleasantly surprised by the
results of later stocktakes –discovering out-of-date stock
and realising they hadn't understood the exact terms of the
The concerning results also illustrate that prior to purchase,
just 14% of franchisees conducted research into their chosen market
and a mere 11% actually viewed the operations of the business.
Similarly, 60% of small business owners admitted that in hindsight
they had exercised deficient due diligence. A further 32% labeled
their efforts as inadequate.
There is clearly room for improvement in supporting and
educating people considering becoming franchisees.
Prospective buyers may greatly benefit from seeking the advice
of a franchise lawyer to highlight the risks involved and the steps
necessary to avoid later issues.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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