Due Diligence Process in Franchising

Due diligence is defined as an investigation of a company to determine operational or financial information. This process is designed to provide information to make decisions about the potential franchise and determine if it is a good “fit” in a market.

If the potential franchise buyer is a group of investors, these investors must be kept informed regarding all aspects of the transaction and marketing potential needs to be investigated to ensure that stockholders do not lose money on their investment.

Most franchises have business models that have been developed and tested from the parent company. Yet, there are many details that still need attention. You do need to make sure you have done your research of the franchise organization, the product or service, what the market area is, and understand the contract and franchisor support.