Buying a US Franchise: Choose Your Independent Advisers

Before buying a franchise in the United States, appoint advisers who can test the deal independently of the people selling it. Within the franchise community, an experienced solicitor and accountant bring different skills: one examines your legal obligations, while the other tests the financial assumptions. The value lies not simply in receiving reports, but in resolving important questions before you commit.

Choose relevant experience, not just familiar names

The Federal Trade Commission (FTC) recommends that prospective franchisees consult an experienced attorney and an accountant before deciding to buy. A trusted family adviser may be helpful, but familiarity alone does not establish expertise in franchise purchases.

For legal advice, look for a US-qualified lawyer with relevant franchise experience and authority to advise on the applicable state law. Ask whether they regularly represent buyers rather than mainly representing franchisors. Someone accustomed to reviewing commercial leases may still need specialist help with franchise disclosure and relationship laws.

For accounting advice, seek experience assessing businesses with comparable operating characteristics. A labour-intensive service franchise presents different questions from a stock-heavy retail operation.

Ask each candidate:

• What similar franchise purchases have you reviewed?
• What will you examine personally, and what will you delegate?
• Do you have any relationship with this franchisor, seller or broker?
• What falls outside your expertise or proposed fee?
• Can you complete the work without rushing the decision?

A referral from the seller is not automatically unsuitable. However, establish any financial or professional connections and ensure that your adviser is engaged by you to protect your interests.

Agree a written scope before the review starts

“Review the franchise” is too vague an instruction. Obtain an engagement letter setting out the documents, work, fees, exclusions and expected deliverables. Check whether follow-up questions and discussions with the franchisor are included or charged separately.

The legal scope should normally cover the Franchise Disclosure Document (FDD), proposed franchise agreement and relevant ancillary agreements. Ask whether the adviser will compare the agreement supplied with the FDD against the version presented for signature. The FTC specifically encourages buyers to investigate any differences.

Ask for the operating manual to be reviewed where access is available. The FTC’s Franchise Rule does not require franchisors to provide that manual, so establish early what your adviser can inspect and what remains unverified.

The accountant’s scope should distinguish between analysing information and independently verifying it. Reading financial statements is not the same as performing an audit. Agree which assumptions will be challenged, what supporting records are needed and whether tax advice is included.

Useful deliverables include a prioritised issues list, written questions for the franchisor and a summary of unresolved risks. Avoid paying for a document summary that does not explain the consequences for you.

Ask your lawyer to map the applicable rules

US franchising is specifically regulated, but the legal framework is not identical in every state.

At federal level, the FTC Franchise Rule requires covered franchisors to provide an FDD containing 23 disclosure items. Generally, you must receive it at least 14 calendar days before signing a binding agreement with, or paying money to, the franchisor or an affiliate in connection with the proposed franchise sale.

That federal disclosure requirement does not replace state law. Some states impose franchise registration or additional disclosure requirements; some also regulate aspects of the ongoing franchise relationship.

For example, the New York Franchise Sales Act generally requires registration before franchises are offered or sold within its scope, unless an exemption applies. Registration is not an endorsement of profitability or commercial suitability.

Give your lawyer the proposed outlet location, your residence, the purchasing entity’s details and information about where the offer and negotiations occurred. Ask which laws apply, whether any exemptions are relevant and whether state-specific provisions affect the agreement. Do not assume that the contract’s choice-of-law clause settles every question.

Bring both advisers together before deciding

Legal and financial findings should inform each other. A contractual obligation may look manageable until the accountant calculates its cost. Equally, a financial projection may depend on flexibility that the agreement does not actually allow.

Arrange a joint discussion focused on the most consequential findings. For each issue, record the obligation, likely financial effect, evidence available and action required. Separate confirmed facts from assumptions and unanswered questions.

Ask your advisers to distinguish between terms that may be negotiable, risks you could manage operationally and risks you would have to accept. Neither professional can guarantee success, and the decision remains yours.

Practical takeaway: Appoint independent advisers early, define their work in writing and require a joined-up assessment. Do not commit while a material legal or financial question remains unanswered.