Pictured above: Richard Lloyd

With white collar workers being hardest hit by the recession there has been a significant increase in the number of professional men and women making a fresh start and buying a franchise business. 

But one Shropshire solicitor has warned that people need to do their homework thoroughly before entering into such an arrangement and should not take any recommendations or testimonials for granted, particularly if the business involves something different from their previous line of work.

Richard Lloyd, a Partner based in the Oswestry office of leading Shropshire and North Wales law firm GHP Legal said: "Redundancy can seem like a great opportunity for starting your own business, especially if you are in the twilight of your working years. And buying a franchise with your redundancy money might appear a far safer option than starting a business from scratch. It is however essential that potential franchisees make sensible enquiries and checks in respect of all relevant matters before committing to anything. This is known as carrying out due diligence.

"The checks should include Financial Enquiries - doing a full credit check on the Franchisor, checking out their latest accounts and making enquiries in the appropriate quarters to ascertain their financial position. The would-be Franchisee should also research the market to establish that there is a real need for the product or service in their area. They should check out the competition and talk to as many existing franchisees as possible to gain a wide view of both the Franchisor and of the business venture generally.

"A fourth area is Legal Due Diligence. This involves having the Franchise Agreement checked out by a solicitor who, whilst thoroughly checking through the Agreement, will look in particular for misrepresentation and promises, terms of renewal and transfer terms in respect of selling the business."