Top Three Due Diligence Tips for New Franchisees

Anyone investing in a franchise concept as a franchisee partner knows the value of research, especially those who perhaps didn’t perform enough of it prior to signing on the dotted line.  Many interested in franchising wonder what to focus on before investing and though the list of topics is long, franchisees can’t go wrong by exploring these three areas before committing themselves.

Get Facts on Historical Operation Data & Profitability Prospects

Make no assumptions about the potential for profit when you invest in a franchise. Find out what the franchisor is using as a means to create profitability prospects, including how many stores have been successful, where, for how long, where those stores are today, and how existing franchisees feel about their investment in the brand. Newly established franchises focus on potential profits based on the value of their products and services, the relevance in the market and the viability of its remaining successful.

Proven business models are only proven when they’ve been operating and successful for some time.  Franchisees must research newly developed franchises carefully to make sure that their investment makes sense for their goals.  Know the potential risks and what the brand has to offer well enough to justify jumping into a newer franchise system.

Understand How You Will Market Your Franchise

Expenditure for the brand image overall often requires franchisees to present a portion of earnings for the benefit of branding efforts across the board.  With a percentage of your bottom line flowing back into this marketing fund, it can be difficult for franchisees to establish just how this is benefiting their individual profitability on the local level.  Each franchisee depends on the brand and model of the franchisor to run a recognized business, and this cannot go unnoticed.

Creating and augmenting a personal marketing plan in relation to your franchise, which may involve client retention plans, attracting new clients, and building a detailed understanding of what is required to promote loyalty to your franchise location.  Franchisees can also reach out for the assistance they need by discussing any marketing shifts that require the franchisors involvement to implement.  Prior to investing, speaking to existing franchisees about marketing and promoting a franchise is important to establish how marketing responsibilities are shared between franchisees and franchisors.

Find Out More About Your Franchise Home

Where you set up shop and the lease arrangement behind this can influence your business in a variety of ways.  Before signing any agreements, ask plenty of questions about how the leasing of a physical premises will be handled and under what circumstances franchisees are able to influence the nature of their franchise home, the lease length and terms, and alterations to it as time passes.  Find out how much control the franchisee can wield in this area and how much control rests in the hands of the franchisor.

Don’t presume that real estate issues and agreements will be handled to your liking and always ask questions in advance so as to have an accurate picture of any potential perks or challenges.  If nothing else, understanding the terms of real estate arrangements will help franchisees to manage expectations or choose to invest elsewhere.

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