What Are the Risks of Buying a Franchise?

Like starting any business, buying a franchise involves risk. Although most franchisees are satisfied and successful, some do suffer financial losses. That’s why you must be particularly wary of any company that “guarantees” profit or certain success. If you hear a claim about a company that sounds too good to be true, it probably is. Investigation of all earnings claims made by a franchisor is especially important. Regardless of earnings claims, you must recognize that your success can come only through hard work. Success or failure ultimately depends on you.

To help mitigate the risks of buying a franchise, studies show that successful franchisees: 

• conduct their own marketing research 
• use their own financial and legal advisors 
• develop thorough marketing and business plans 
• have prior work experience in the industry

Be sure to ask these questions before purchasing a franchise.