Before going to the importance of Due Diligence in Franchise Agreement lets first understand what is due diligence?

Due diligence is gathering and analysing information about a business or investment opportunity before making a decision. It helps prospective franchisees to assess the risks and benefits of the franchise opportunity and make an informed decision.

Let us discuss some aspect where we have to be diligent in the franchise agreement and these are:

• Financial Aspect: Franchisee should have to review after the franchisor financial statement of the company which includes franchisor income, balance sheet, cash flow statement etc.
• Franchisee Support: Another important factor to consider is the franchisor’s level of support. The franchisor is responsible for training and supporting the franchisee to ensure they can successfully operate the franchise. This includes initial training, ongoing support, and access to resources and materials.
• Brand Reputation: The reputation of the franchise brand is also an important consideration. The franchisee has to look after the franchisor brand history, track record and the reputation of the brand.
• Legal consideration: Both the franchisor and franchisee have to look after the legal aspect of the franchise agreement and for understanding this they have to consult with the lawyer for that understanding.

So these all are the major aspect for which we have to pay due diligence while entering into the franchise agreement.