Is There A Franchisee Association:
Is The Current Owner In Full Compliance With The Franchise Requirements:
Buying & Marketing Groups - Is the company part of a buying or marketing group? Can the relationship be maintained if the ownership in the business changes? Are any and all membership dues and fees current? Is the business on track to meet any minimum buying or selling requirements for the current business year?
Rebates – Many buying groups offer annual or semi-annual rebates to their members if they buy a minimum quantity or dollar value of a specific product, group of products or a product line. If rebates are involved are you going to give the seller a share of them? Does the seller keep accurate bookkeeping records of rebates that are due the company? If you are buying assets do you consider rebate dollars to be assets?
Ownership – who specifically owns the shares of the corporation? Does the person that you are negotiating with own all of the shares?
It is not uncommon to discover that there are other shareholders such as relatives and employees. If there are other shareholders it is important to ensure that the individual you are in discussion with has the authority to negotiate the sale of all the shares on behalf of all of the shareholders. I would request a letter from each shareholder specifically stating that Mr. Jones has the right to negotiate the sale of the shares that I own in the ABC Corporation signed Ms. Smith, March 14, 2004.
Date of Ownership – has the seller owned the corporation from its inception? If the current owner has not owned the corporation for at least five years, what are the terms and conditions of his Purchase Agreement with the previous owner especially with regard to liabilities?
Board of Directors – Does the company currently have a Board of Directors?
Even a company that does not have its shares publicly traded can have a Board of Directors. If you buy all the shares of a company that has a Board of Directors, you as the sole shareholder can choose whom you want on that Board and if you even wish to continue it. Some financial institutions, when they lend money require a seat on your Board of Directors. They seem to believe that this gives them greater knowledge and some control over the company’s performance.