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Skip to 0 minutes and 9 secondsIn the words of Canadian Les Stewart, much of the marketing of systems is the putting to sleep of the candidate's risk aversion mechanisms. Due diligence is about waking these mechanisms up and doing your homework before you finalise a commitment.

Skip to 0 minutes and 31 secondsPre-purchase due diligence is the time when all parties to a possible franchise relationship need to be wide awake. Once the contract is signed, it is too late to air anxieties that might turn out to have been deal breakers. Franchisors need to conduct due diligence on the culture and laws of countries they want to expand into, as well as the people they want to expand with in each of those countries. For master franchisees or area developers, due diligence is about getting a good understanding of who is the franchisor? What is their motivation in expanding into your country? What are their future intentions? What is their track record in supporting the brand?

Skip to 1 minute and 20 secondsDue diligence is also essential for unit franchisees. It is not enough just to love the brand. In jurisdictions where pre-purchase disclosure is mandatory, the disclosure document is a good starting point. But it is only a starting point. Good advisors will have comprehensive checklists to guide the process. Due diligence is not cheap. Experienced legal and financial advisers should be part of your due diligence team. And remember, time spent in reconnaissance is rarely wasted.

Brand due diligence

Due diligence is doing your homework before you finalise a commitment.

As Canadian Les Stewart has noted, ‘Much of the marketing of systems is the “putting to sleep” of the candidates’ risk aversion mechanisms’. Pre-purchase due diligence is the time when all of the parties to a possible franchise relationship need to be wide-awake. Once the contract is signed it is too late to air anxieties that might turn out to be deal breakers.

This video discusses the specific due diligence considerations and concerns for franchisors, master franchisees, area developers and unit franchisees.

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International Franchise Law: the World is Yours

UNSW Sydney

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