When you are buying into a franchise
, you are legally buying the right to use a specific trademark or business concept, which has been tested by the franchisor prior to franchising. The chief benefit of you investing in a franchise
rather than a start-up or independent business, is that you are able to capitalize
on the proven business model, trade name, brand and full support system provided by the franchisor. There are a number of central questions you should ask a franchisor about before buying into a franchise or business opportunity...
Here is a simple checklist you can print off and use when you are assessing a franchisor and a franchise opportunity. You can circle the answers that are appropriate to your situation.
1. Does the franchisor have a track record of success? How long has the franchisor been in business? (the longer in business the better the business system...)
|less than 3 years
What will it cost me?
How much can I expect to make in my first year/couple of years in operation?
|1x Current Income
||2x Current Income
||More? How much?
Will the franchisor give me exclusive territory rights for the period of the franchise?
Will the franchisor assist me with:
An initial training program?
An on-going training program? On-going support?
A PR and advertising (marketing) program?
Help with raising financial funds?
Finding reputable suppliers/distributors of products and services?
Has the franchisor a good reputation with existing franchisees? Can I talk to existing franchisees?
What happens if I want to leave/give up the business? Can I sell the business to anyone I like?
Has the franchisor shown me his/her Uniform Franchise Offering Circular? Have I double checked certified financial figures with the franchisor and franchise attorney?
Is my franchise attorney completely happy with the terms of the Franchise Agreement (which are in my best interests)?
Once you have ticked a "yes" answer to all of these questions and discussed all relevant details with the franchisor, existing franchisees and your franchise attorney, you should be quiet happy to sign the Franchise Agreement. Use this reference as a guide when you are contacting a franchisor and when you are interested in investing in a franchise opportunity...
Need more advice? Check out my next blog installment on "Becoming a Successful Franchisee- Checklist"....