Two businesses with the same asking price may call for very different checks. Regulation, customers, employees and seasonality vary by industry. A sector-specific checklist is therefore more useful than a generic price comparison.
Practical example
An established franchise offers a known brand, but royalties, territorial rights and franchisor approval may alter the deal materially.
What to check before moving forward
The franchise agreement
Review obligations to the franchisor, royalties, mandatory purchases, territory and requirements for a new owner. Check whether a transfer needs explicit approval.
Continuity of contracts
Review important contracts, including expiry, change-of-control and assignment provisions. Continuing a customer, supplier or lease relationship may depend on specific contractual terms.
Additional transaction costs
Include adviser fees, registration costs, any broker fees, repairs, permits and financing charges. The listed purchase price is only part of the initial outlay.
Assessing the location
Assess actual footfall, accessibility, nearby competition, visibility and possible planning changes. A location that looks attractive in photos may still underperform.
Valuation methods
Do not treat one valuation multiple as a definitive appraisal. Consider sustainable earnings, assets, risk, growth prospects and genuinely comparable transactions before forming a value range.
How to use this guide
Start by requesting sources for each important claim and noting what remains unverified. Cross-check answers against records, visit the operation where appropriate and bring material risks to an adviser before committing. Never fill missing financial figures with your own assumptions.
Evidence worth requesting before you proceed
A sales description is a starting point, not proof. These documents help distinguish verifiable facts from expectations:
- Franchise agreement and outstanding obligations
- Royalties, fees and mandatory purchasing
- Current third-party contracts
Request information appropriate to the negotiation stage and respect confidentiality arrangements. Sensitive documents may be shared only after a buyer is identified.
Final takeaway
A sound transaction starts by defining what changes hands, checking the facts and documenting the agreement. Use this guide as a map of questions, not a replacement for a review tailored to the actual business.
General information only; not personalised legal, tax or financial advice. Rules depend on the transaction and may change.