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Before signing on the dotted line with a franchise, it is imperative to do the proper <a href="https://1851franchise.com/how-to-perform-due-diligence-on-a-brand-that-doesnt-have-franchisees-2375">due diligence</a>, which means conducting the research required to get a full understanding of the brand and the franchise requirements.The first step should be carefully reading the <a href="https://1851franchise.com/10-must-ask-questions-about-franchise-agreements-2708306">franchise agreement</a> in its entirety to ensure you know what you would be getting into. Assessing the initial investment and financial obligations and comparing those to your personal financial liability and resources is also an integral part of the due diligence process.&nbsp;In terms of reading the FDD, it’s important to review and understand the unit economics of the franchise — <a href="https://1851franchise.com/how-to-read-an-item-19-3200">Item 19</a>. Also, make sure to really dig into the costs that will be associated with joining the brand — <a href="https://1851franchise.com/the-most-important-items-in-an-fdd-item-7-initial-costs-2712071">Item 7</a>. Check out data relating to franchise growth in <a href="https://1851franchise.com/the-most-important-items-in-an-fdd-item-20---outlet-transfer-and-franchise-owner-information-2712074">Item 20</a> to gauge the scalability of the business, and ask questions if there is any litigation listed in <a href="https://1851franchise.com/understanding-item-3-of-the-franchise-disclosure-document-litigation-history-2703061">Item 3</a> of the FDD.Next, speak to at least 10 established franchisees for <a href="https://1851franchise.com/what-is-the-value-of-franchisee-validation-in-the-franchise-sales-process-2703208">validation</a> — franchisors might have a list of recommended franchisees to speak to, but break out of the habit of only contacting these individuals to ensure you get the real scoop.If possible, meet the <a href="https://1851franchise.com/the-importance-of-a-strong-leadership-team-972">leadership team</a> and learn about the company’s vision and business philosophy. Whether it is during a <a href="https://1851franchise.com/how-to-make-the-most-of-a-franchise-discovery-day-2714732">discovery day</a> or separate phone call, try to find out where the brand and industry are going and how they plan on staying relevant. You also want to look for a brand that has the capital to continue supporting the franchise system, and reading the footnotes of the company’s audited financial statement is where you will get that insight.Throughout all of these steps, especially when it comes to reviewing complex documents like the FDD and franchise agreement, make sure to seek out the help of a qualified <a href="https://1851franchise.com/franchisebrokerawards">franchise broker</a> or <a href="https://1851franchise.com/2020s-top-franchise-legal-players-2713623">franchise attorney</a>. When contemplating buying into a franchise system, franchise professionals can be an essential resource as they are experts in the industry and know the ins and outs of evaluating a franchise.

How Do You Do Due Diligence on a Franchise?

1851 Franchise

Performing due diligence on a franchise opportunity includes looking over the Franchise Disclosure Document, talking to advisors, meeting the leadership team, seeking franchisee validation and more.

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Pigtails & Crewcuts

Pigtails & Crewcuts National Convention Spotlights a Business That Builds More Than Just Revenue

Why Franchisees Are All In: Pigtails & Crewcuts National Convention Spotlights a Business That Builds More Than Just Revenue

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Pet Wants

How Pet Wants Offers a Franchise Opportunity That Feeds Both Pets and Passion

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Keke's Breakfast Cafe

The Simple Secret Behind Keke’s Breakfast Cafe: Design for People, Then Scale

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Benjamin Franklin Plumbing

Benjamin Franklin Plumbing Franchise - Bob Evenhouse - Grand Rapids, Michigan -  1851 Franchise

Corporate Refugee Turned Punctual Plumber: Why Bob Evenhouse Left Corporate Life To Build a Family-Focused Plumbing Franchise

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BooXkeeping

image of booxkeeping franchise graduation present

Why a BooXkeeping Franchise Might Be the Smartest Graduation Gift You Can Give

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How Do You Do Due Diligence on a Franchise?

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