What type of due diligence, investigation or validation should a prospective franchisee perform? A prospective franchisee, someone looking to invest in a franchise, should learn as much as possible about the business and franchise opportunity prior to signing any contract or paying any money to the franchisor. First and foremost, read the 23 items of the FDD. This document is supposed to be written in "plain English" for a prospective franchisee's review. Pay particular attention to Items 5, 6 & 7, the financial disclosures. In addition, review Item 20 to learn about the system and its anticipated growth.  Read more »

Existing and former franchisees of a system can be a valuable resource and an important part of the due diligence or validation for anyone looking to buy a franchise.  Before you sign a franchise agreement or pay any monies for a franchise, make sure you have spoken to as many of the existing and former franchisees as you can and ask them what they like and dislike about the support and training they receive.  Both existing and former franchisees are listed as Exhibits to Item 20 of the Franchise Disclosure Document (FDD).  If there are 500 franchisees in a system you are considering, I would speak to at least 50 of them around the country and all of the former franchisees you can reach.   Read more »