Investigate the quality of your prospective franchisor

When you take up a franchise, it is extremely important to check the background and business performance of your prospective franchisor. Work through the following checklist to satisfy yourself that you are entering into a sound business venture:
Is this business financially sound? The franchisor must have the financial resources to sustain the network and to ensure the continued existence of the franchise operation. Therefore, investigate the franchisor’s financial standing. Ask your accountant to look at their audited accounts.
Is there a market for the franchise’s products? Has there been any market research?
How long has the franchisor been in franchising?
How many franchisees are there? Ask for a list with all the names and addresses and talk to them. Visit and spend a day each with two/three franchisees. You will get much closer to the reality of the business and gain a closer understanding of what is involved.
How many franchisees have failed? Why?
Who are the main competitors? How do they compare in terms of price, quality, delivery, and service?
What sales area is being offered?  Is it geographically based?
How long is the term of the legal contract? Can you renew it?
Do you have to achieve minimum levels of turnover, or buy minimum amounts of stock? What will happen if you don’t achieve this?
Can you sell the business in due course? What restrictions are there on sale?
What initial/ongoing training is offered?
How much support is given in choosing and fitting out premises?
How much the franchise cost and what does the price include? How does this compare with other franchises? How much will you pay on an ongoing basis?
Have you been given any financial projections for your business? Have you seen any actual trading figures from existing franchisees that show whether these projections are realistic?
Remember! Don’t rush. Be wary of franchisor pressure to sign up.
 
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