Lance Hood:               Richard, you say that there are 25 things that you absolutely must know about a franchise contract. Can you share some of the most important ones with us?

Richard Parker:           Sure. For example, is the contract transferable or will the buyer have to enter a new agreement at new terms and conditions with the franchisors? Another one would be does the franchisor have the right of first refusal to buy the business?

                                    Interestingly enough in most agreements between the franchisee and the franchisor if the franchisee wants to sell their business at any point in time he or she must give the master franchise the opportunity to buy it first. That doesn't mean at a reduced price but they basically have the right of first refusal.

                                    So for example, you can go through the whole process with a franchisee, think you have a whole deal in place to buy their business, and at the last minute subject to approval with the franchisor they say, "No. We're going to buy it instead. Sorry but you're ‘S' out of luck." You know the old expression? So you've done all this work and you can't own the business, they're buying it.

                                    Another thing is for example, are you prohibited from owing other franchises or even multiple locations? There's some franchise contracts that don't allow you to own any other businesses. You're full time has to be devoted to that particular business. It may not even allow you to buy a second or third one of that particular franchise.

                                    Another thing that you find in a contract is will the franchisor assist in the finance? That could be very helpful.

                                    Very often you must be approved by the franchisor and incur the costs of going through the training before you can close the deal. So you imagine you have to spend $3 or $5000 to go through the approval process with the franchisor and then the franchisor decides for example they want to buy it on their own or sell it someone else. So you need to know what is involved from the approval process and is your time and money at risk subject to approval from the franchisor.

                                    Then there's also - another point is the transfer fee. Almost every single franchise agreement has a franchise transfer fee where a new buyer is required to pay. But I will tell you that it is very negotiable. And I can't even recall the last transaction where we had one of our Diomo clients who bought a franchise resale where there was a transfer fee involved and didn't get the seller or the franchisee to pay it. And if it's not 100% it's certainly the vast amount because it's in their interest to get it transferred.