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Once you know whether you'd like to franchise or purchase the business, you'll need to evaluate each specific opportunity. The key is to: Do your research.

The research you conduct should aid you in understanding the company from both a financial standpoint and also in the larger context.

You should consider:

All existing reports

It's time to put on your detective mask on. Start by obtaining the Uniform Franchise Offering Circular (UFOC). This document is packed with important information regarding the franchise's financial, legal, and personnel background.

Rules and regulations connexes

Each franchise is distinctive. Make sure you have the right to use the franchise name, trademark, and do business in a protected area from competitors. It is also possible to determine if you'll get assistance with training and management from the franchisor, and you'll be able to benefit from the expertise of the franchisor in marketing and advertising.

Contracts

The franchisor usually reaps more profit from the agreement than the franchisee. The franchisee typically has to meet sales quotas and purchase equipment, supplies and inventory. It is important to be aware of it everything before you sign.

If you're looking to buy an existing company You should consider:

Licenses and permits

You'll need to acquire the necessary licenses and permits from the current owner or request them yourself. Find out what federal, state, as well as local permits and licenses you'll need to run your business.

Zoning requirements

Zoning regulations can affect your business. Make sure your business follows the basic zoning regulations in your area.

Environmental concerns

If you're purchasing real estate along with the company, you must check the environmental regulations in the area.

The value of the business

There are a variety of ways to determine a fair price to sell a business. Here are a few:

The capitalized earning approach

This refers to the return on the investment which the investor hopes to earn.

Method for earning excess

Like the capitalized earning method except that it separates return on assets from other earnings.

Cash flow method

This approach is commonly used to determine the amount of a loan the business is able to support through its cash flow.

Tangible assets (balance sheet) method

This method analyzes the company by the tangible assets.

Value of specific intangible assets method

This is a comparison of the creation of an intangible asset with purchasing it.

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