Just because a company has franchise locations doesn’t mean it’s run particularly well. As a new franchise owner, you want a franchising company that is well-organized, provides plenty of insight into financial opportunity, and communicates well with its franchisees. If you come across any of these signs, it’s a good hint to do some more digging.
1. The Company is Hesitant to Reveal Numbers
You need to be convinced that signing on with a given franchising opportunity is going to make you money. If a franchisor is reluctant to show you financial data from its other franchisees, question why. Certainly, if a company is new to franchising, it won’t have the data to show you, but if that’s not the case, it might be because those numbers aren’t all that appealing.
2. The Franchise Charges Significantly More Royalty Fees Than Others
Here’s where doing your homework on what you should expect to pay for a franchise comes in handy. Knowing what other comparable franchises charge franchisees can send up a red flag when you come across a company that charges significantly more. Ask why they charge more. Perhaps the extra expense means they cover more marketing fees or something else. Still, if the price to play isn’t justified, move on.
3. There are a Lot of Existing Franchises for Sale
Look to see who’s selling existing branches of a company’s franchise. Reach out to some of those franchisees to see if you can find out why they’re jumping ship. Unless there’s something global affecting them all, like a bad economy, it’s usually a concern when you see multiple branches of the same franchise up for sale.
4. Franchise Owners Have Nothing Good to Say
Turning super sleuth can pay off when it comes to researching potential franchises. When you interview business owners who are operating franchises, get a sense of how they like working with the brand. Ask if they’d do it again all over. If they hesitate, ask why and factor that into your own decision.
5. Positive Brand Recognition is Dwindling
Consider what you’ve heard about the brand you’re considering in recent years. Have there been lawsuits that have tarnished its good name? Have you noticed a marketing and advertising push, or do you feel like the brand is covered in cobwebs? As a franchisee, you’ll rely on the bigger brand to help you market your location, so you want to choose a franchise that already has a solid standing in the public’s eye, otherwise it’ll be an uphill battle you’ll never win.
The presence of any of the above factors doesn't necessarily mean a franchise is bad, but could signal problems in certain cases. Only you know the specific criteria you’re looking for in a franchise, but in general, you want one that will make you money and be comparatively easy to work with. Don’t be shy about asking questions, as they will help you make an informed decision. Not every franchise is a good fit for everyone, so keep looking until you find the one that’s just right.
Susan Payton is the President of Egg Marketing & Communications, a marketing firm specializing in content writing and social media management. She’s written three business books, including How to Get More Customers With Press Releases, and frequently blogs about small business and marketing on sites including Forbes, AllBusiness, The Marketing Eggspert Blog, and Tweak Your Biz. Follow her on Twitter @eggmarketing.