Purchasing an existing franchised business, as opposed to starting a new outlet, means that there is a track record. The record (the financial history of the business) should be looked at very carefully together with accounting advisers.

It may be a great opportunity (genuine reasons for sale - retirement etc; and a growing sales trend; equally it may have been underexploited by the outgoing franchisee for a variety of reasons, and so present great turnaround potential). On the other hand, there may be underlying and incurable problems: is the local market eclipsed by new competition, or changing traffic patterns. The watchword is to investigate very carefully -- the local market conditions, the detailed history of the business, and also of the franchised network itself. Speak both to the franchisor (who will probably want you to ensure continuity in the market, so get as many facts as you can from it, but don't rely on its opinion entirely); and speak to as many other franchisees in the network as you can. Both about their views of the business being sold, and, most importantly, their views of the franchise and the franchisor. are they happy? Are they making money? How much in comparable locations? Above all take sound, independent financial advice.

Key issues to beware of in the contract include: be specific about exactly what assets and any specific liabilities you are acquiring; can you rely on the seller's indemnity against liabilities you're not taking over? What can you get the seller to warrant, ie legally represent will turn out to be true? Good title to assets, no hidden defects, that past performance was as represented to you? This may give you a right of recourse if things go wrong. Remember you take over all employees, with all their accrued benefits -- check carefully, and possibly seek indemnity from the seller; are any key assets on hire purchase, or leased? You'll need to them take over. Who bears any transfer costs? Very important: how long a franchise contract are you getting? It may need to be renewed or extended. If so, are you sure it will be on the same terms? Also check that the vendor is responsible for any approval costs payable to the franchisor. Remember too that you'll need to pass the franchisor's training programme. In the unlikely event you fail -- are you committed to the deal? And finally, remember the lease of the property: it will need to be transferred to you, with landlord's consent and legal costs who will pay for these?