Q: Are there any hidden costs with franchising?
Mar 23 2006
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Theoretically, no, there should be no hidden costs in the sense that your franchisor should disclose to you all the relevant figures relating to the business you're buying. Keeping costs deliberately hidden is not in anyone's interest in the long-term, and if your franchisor is ethical they will want you to understand what is required from you to make your business work.
However, sometimes franchisees discover costs and fees further down the line that they hadn't taken into account when starting up the business. This is avoidable if you do your homework. Check out all the possible angles and potential costs of the franchise package you are taking on before you sign anything. The onus is on you to check everything and ask your franchisor for as much information as possible. Do not take anything for granted, make sure you have clarification in writing from your franchisor. To paraphrase what a wise man once said, assumption is the mother of all blunders!
All members of the bfa (British Franchise Association) sign up to a code of conduct, which states they must be transparent in this area. But even if your franchisor is a member, it would still be useful to ask for confirmation of all the costs associated with setting up in business, such as legal, accountancy, company formation, and so on, just to ensure you know the full extent of the finance required and don’t get any surprises.
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