What is Due Diligence?

If you have ever looked into buying a business or franchise, you have most likely come across the term ‘due diligence’, but what is due diligence?

Research and analysis of a company or organization done in preparation for a business transaction” (Merriam-Webster).

Pretty simple, but what do you have to do to perform due diligence?

  • Request and read the FDD

It’s one thing to get the FDD, and it’s another to actually read it. The FDD provides valuable information about the business, such as the history of the company, financials, a breakdown of the costs, contact information for franchisees and much more. You must read this document thoroughly and have your lawyer read through it as well.

  • Market research

The most important thing to consider when buying a franchise? The location, so market research is necessary. You have to look at the demographics in each area before you choose a location, and pick a location that will make the most sense for the franchise.

  • Talk to franchisees

Speaking to current or past franchisees will give you insight into the inner workings of the franchise and franchisor. How was the training? Do they offer enough support? The only way to know is by asking someone who has gone through it.

So, due diligence are the steps you need to take when evaluating a company for a business transaction.  You must do the proper research and analysis before purchasing any franchise or business.

If you are looking for a franchise opportunity, Executive Care might be right for you. To learn more, click here.