Selecting a franchise is a tough decision, but doing your homework and looking into what the franchise has to offer will help to separate the good ones from the bad.
Preparation is the key to making an informed decision, so a checklist of questions should be drawn up so that you are confident the franchiser will be reliable and help you to operate a successful business.
There are a number of areas to examine when considering a franchising opportunity. The financial security of a franchise is an important consideration, along with how well it has done so far, its reputation, why the company went into franchising, whether a comprehensive training scheme together with supporting manual will be provided, and whether it can help you to obtain start up funding.
Potential franchisees are also advised to speak to the company's existing franchisees to find out what their experiences have been. Good franchisers should allow free access to its network of franchisees. Doing this will enable you to find out how people who work for the franchise are treated, whether they get enough support, and if their opinions are valued.
However, what existing franchisees tell you about their experiences should be regarded in the right context. Bear in mind that if things are not working out well for some franchisees it could be, at least in part, their fault, so it does not necessarily mean that you will have a similar experience.
Another factor to consider is whether a franchise has joined a national franchising association or the U.S.-based International Franchise Association (IFA). These associations are self-regulated and franchises are accredited based on a range of criteria.
The Federal Trade Commission (FTC) mandates that franchises are regulated by the FTC, and that a Uniform Franchise Offering Circular (UFOC) be provided to a prospective franchisee interested in buying into a franchise opportunity. A franchisor must meet the legal approval of the FTC in order to operate within a specific state in the US.
The operations of accredited franchises will be conducted in an ethical way and within the framework of a comprehensive franchise agreement.
Disclosure of financial and directors' records, financial projections and the identity of existing franchisees is also an important condition franchises need to adhere to in order to qualify for regulation under FTC conditions.
The final thing to consider before signing on the dotted line is the small print of your franchise contract. Ensure that your agreement is a balanced document that protects both your rights and those of the franchiser. When in doubt, consult a legal adviser before committing to any contract.
In the end, the franchise collaboration should benefit both parties, so clear communication is important from the start.
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