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Things to consider before becoming a franchisee

On Behalf of | Jan 15, 2019 | Buying & Selling Businesses |

Opening a new business in North Carolina as a franchisee can be a lucrative endeavor, but it’s important to consider a variety of risk factors before moving forward with an investment. One of the first factors to analyze is whether or not a business opportunity is in an established or relatively new market. Old markets aren’t 100 percent safe, and new ones aren’t always fads, but how established a particular business is should weigh heavily in calculating the risk.

Another factor to consider is locality and seasonality. Some businesses only generate enough revenue to operate in specific regions or during specific times of the year. Running a surfing supply franchise in Minnesota during the winter isn’t likely to be profitable. Franchisees who only want to work half the year may benefit from opening a business that’s only busy from April to October. Recession resistance is also important. Whether or not a franchise can hold up during an economic downturn will help determine long-term success.

How the government regulates is a major factor when analyzing franchising risk. The industry most affected by this currently is cannabis. While many states have legalized the medicinal or recreational use of marijuana, the federal government hasn’t, making it very difficult to use banking services. Both current and potential future regulations need consideration. New laws could change the way certain markets operate almost overnight.

When buying a franchise, entrepreneurs are advised to consult with an attorney before signing any contracts. Experienced attorneys can look closely at franchise documents to make sure there are a minimal amount of risks or liabilities for their clients.