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Ward Off Future Risk With Franchise Due Diligence

By Author: Naman Vohra
Total Articles: 42

Business franchising is one of the safest and most risk free way to start up and run a successful business. A franchise conducts the business by selling goods and services by the usage of the registered trademark, showcasing the symbol of brand image or name of the parent company. A franchisee is an independent entity which owns all the resources and operations of the outlet and sells the franchisor's product or services, trades under the franchisor's trade name and benefits from the franchisor's help and support. In turn, franchisor benefits through a royalty decided between the two parties. Franchisor also benefits with more brand value without investing much into it. The franchisee owns the outlet it runs. But the franchisor keeps control over how products are marketed and sold and how their business idea is used.

Despite of its popularity, there are risks attached to franchising. Both the franchisor and the franchisee need to check the authenticity before entering into the business. This calls the need of Franchise due diligence which highlights and brings out the irregularities of a prospective franchise. Individuals considering a franchise need to perform a comprehensive evaluation of the specific franchise before joining hands. Investing in a franchise without performing adequate due diligence can be risky and can lead to future problems.

Hiring of a credible third party company who provide franchisee due diligence service can provide with a report based on accurate, timely and unbiased information. Franchise Due Diligence as a process conducts a check which can ensure that prospective franchise adhere to various global regulations like US FCPA, UK Bribery Act and Indian Prevention of Money Laundering Act etc. Apart from this, a due diligence company conducts different checks like address check, checks on the registered name of the entity to prevent any chance of partnering with a fraud company. These checks bring out if the franchisee has its name listed in any of the global criminal databases or in any court cases. Criminal Database checks conducted on the owner, promoters, proprietors or anyone who has a vested interest in the franchise can provide with useful information and which would come in handy by an organisation before stepping forward to enter a franchise agreement.

Thus, by conducting a thorough due diligence a franchisee can be in a better position to make an informed decision about their franchise investment.

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