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Advance Research for Smart Franchising Often Overlooked

Changes in the way people do business and interact with the commercial world are changing how potential franchisees perform their due diligence research. Investigating wisely and considering areas often overlooked are important aspects of preparing the way for a new franchise start-up. Inquiries now can be enlightening for wise business decisions.

Consider asking your potential franchisor:

How does the franchise system use e-commerce and online shops?

By discussing in greater detail how the internet is used as a tool within your potential franchise system you may discover potential challenges and advantages. Will your franchisor compete with franchise locations through the use of online shops, or an e-commerce presence? Consider whether acquiring an online presence is important to your business and whether or not customers will be buying products online from the franchisor or if online trading sites may be used. If not, discuss any potential shift in this direction and its effect on your franchise location to better understand how your franchise will deal with competition and expansion in the market.

How will funds paid by the franchisee to support marketing efforts be used?

Inquire about marketing and how your franchise will be supported through the agreement between franchisee and franchisor that details marketing costs. As part of a franchise with the benefits of brand recognition and a streamlined business plan, franchisees are often required to fund marketing efforts that support spreading the word about the brand, their business in particular, and establishing a rapport with customers through different advertising campaigns. Find out how these funds will specifically be used. Before completing and signing an agreement ensure that you completely understand how marketing contributions will assist your new start-up franchise and that they are detailed in the agreement.

Where can stock and base materials be sourced for your franchise?

Have a passion for an industry and an idea of how to source the necessary ingredients or products for your enterprise? Consider how entering into a franchise agreement will shape your stock sources and discuss with your potential franchisor the nature of your agreement , how you can source the materials you need for your franchise business, and if approval must be acquired first. Discuss and negotiate what may be possible when entering the franchise system to minimize surprises later.

What options are there if the franchisor goes out of business?

To remain as informed as possible, asking detailed questions about what may or may not occur should the franchise system as a whole become obsolete is part of responsible due diligence. Consider what the effects on your franchise enterprise will be, whether the brand will still work in your favor even if the franchisor is no longer expanding, whether you will remain obligated to pay certain fees, and what your responsibilities will be. Consider how to minimize unknown shifts for your investment and how to maximize your awareness throughout the process of researching your franchise investment.

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