Purchasing a Franchise in NY: 3 Red Flags to Watch Out For

At FranNet NJ NY, we have serious faith in the franchise system; indeed, many of our consultants, brokers, and educators are former or current franchise owners, and were inspired to further the franchise system by their own life-changing franchise experiences. However, our faith in the franchise system as a whole does not mean that every franchise out there is infallible.

In fact, one of the hardest parts about purchasing a franchise in NY is separating the wheat from the chaff to find a franchise that is as qualified as it is complementary to your unique personality. At FranNet NJ NY, we aim to help those in the process of purchasing a franchise in NY by compiling suitable candidates matching the time commitment, skill set, and workplace preferences that you bring to the table. Aside from this brokering role, we also play the part of gate keeper, making sure that no red flags slip past you so that you are never in danger of aligning yourself with a sinking ship.

Given the many hurdles that franchisers encounter when entering into this industry, the last thing they need is another challenge in the form of an unqualified or unrefined franchise system. Choosing the wrong brand to invest in can cost you serious human and financial capital. Showing restraint on your own can be exceedingly difficult, especially when it feels as though saying no is equivalent to turning down an opportunity. That’s where we can help.

Keeping in line with our role as gatekeeper and guide, the FranNet NJ NY team would like to present a handy list of red flags to watch out for when purchasing a franchise in NY. Read on to learn what to avoid – it could save you serious money!

Do they have questionable franchise disclosure documentation?

All franchises must provide you with a franchise disclosure document (FDD). This should be an extremely thorough look at the franchise’s operational model, financial performance, and leadership infrastructure. It should also include precise terms for your prospective franchise agreement, with both the franchise fee and royalty payments specifically outlined.

Quality franchises give you an FDD, and encourage you to take a long look. The franchiser should be willing to answer any questions you may have. If they aren’t trying to make you as knowledgeable and comfortable as possible, then consider this a red flag. If they delay the delivery of your FDD, provide a document with a paucity of information, or generally seem unwilling to disclose information, then be on your guard.

Are they proposing international expansion too soon?

Some franchisors will tell those looking at purchasing a franchise in NY to consider their global options. They’ll tell you about the age of globalization, or talk your ear off about the concept of a “global village,” spouting stats about an increasingly global market, but all of their talk is ultimately just a sales pitch if you aren’t ready to export a franchise – or, more importantly, if the franchise isn’t ready to support you.

Making an international move risks damaging the brand and your bank account, since it can be tough to secure proper system support across international lines. If a brand expands too quickly, it risks outpacing the capacities of its supporting infrastructure. When your franchise support system can’t keep up with the growth, there is a problem! If they push this option without support systems in place, you should consider this a big red flag, and look elsewhere.

Have you caught wind of unhappy franchise operators?

Nobody will have better insight on the everyday operation of a specific franchise than the people who have actually committed to running it. One of the most important parts of the research process when purchasing a franchise in NY is due diligence when speaking with existing franchise operators.

Speak to as many as you can. If you hear consistently negative feedback, then you know that you should steer clear. FranNet NJ NY seminars and networking events are a great place to have these discourses between unhappy franchisees. Talking with franchisees is an important aspect of the research process which most people don’t even realize. This crucial dialogue is triggered at every single franchise event that we host, so check out FranNet NJ NY seminars and networking events near you!

Aug 11, 2015