What is the primary reason many prefer to go into business with a franchisor? The appeal and advantages of additional support, security and assurance coming from an established business model. Informed decisions stem from research. Developing the ability to know the right franchise agreement comes out of this research, which begins long before the franchise agreement is signed.
So how can potential franchisees know what to look for if they want to enter into a sound franchising experience? Self reliant research, interaction with existing franchisees, and knowing when to ask for guidance take center stage.
Talk to Franchisees
Great advice: get around and talk to as many of the existing franchisees who are already part of the franchise system. Presume that each one has something valuable to offer, and don’t merely seek to find answers you want to hear.
Talking to as many existing franchisees as possible, at least 20 or more for example, can give potential franchisees the inside information that they need and from a kaleidoscope of individuals, which allows franchisees to piece together information and make valuable connections as to the integrity and collective impression of the franchise.
Some of the most valuable information stems from observing not only what existing franchisees have to say, but also what they choose not to say, their body language, and the overall feeling of whether or not they are pleased with their choice to invest in a specific franchise system. This kind of “interview” process allows potential franchisees to perform even more detailed due diligence research. Getting live opinions and faces in front of you is highly advantageous during the initial research stage.
Solicit Legal Support
Reaching out for the support of qualified legal professionals who are experienced with the franchise industry and investments is another excellent way to secure a wise decision. By seeking the advice and oversight of an attorney to review the franchise agreement document, franchisees can learn more about potential risks associated with investing in any given franchise, which an attorney’s trained eye can weed out.
Additionally, the support of an attorney may assist potential franchisees with acquiring detailed clarification regarding areas of the agreement which are unclear. This kind of support provides a solid source of guidance that new potential franchisees just entering the industry may find invaluable down the road should anything involving legal matters develop.
Know Your Start Up Costs
Relying solely on the franchisor’s assessment of start up costs may not cover the real story once a franchise location is up and running, especially when the varying costs of different geographic locations is not fully taken into consideration, such as the difference between running a franchise inland in markets with relatively low real estate costs versus an area in a larger city in costly coastal regions.
Potential franchisees who aim to fully understand start up costs include in their estimates a breakdown of costs based on inquiries with franchisees locally, and if expansion is desired, a breakdown of costs in different areas. By compiling this information and calculating when the establishment will see profits, franchisees are acquiring self-sufficiency, reaching out for more information rather than simply relying solely on the franchisor for cost estimates.