Franchisor ChecklistBefore you buy a franchise, find out the answers to the hard questions.
So you've found a franchise you feel good about purchasing. But when it comes down to signing on the dotted line, feelings aren't good enough. How can you tell if this apparently ideal franchise is really the right one for you?
To test your instincts, answer each of the following 24 questions. If your answer to any of the questions is no, or if you're simply not sure how to answer, further investigation of the franchise is definitely a good idea.
The Franchise Organization
- Does the franchisor have a good track record?
- Do the principals of the franchise have industry expertise?
- Is the franchisor's financial condition strong?
- Does the franchisor thoroughly screen its franchisees?
- Are the franchisor and its franchisees profitable?
The Product Or Service
- Is there demand for the product or service?
- Are industry sales strong?
- Does the franchise's product or service fare well against competitors' offerings?
- Is the product or service competitively priced?
- Is there lots of potential for growth in the industry?
The Market Area
- Are exclusive territories offered?
- Does the territory you're considering have sales potential?
- Is the competition strong in this area?
- Are the other franchises near this area successful?
The Contract
- Are the fees and royalties reasonable?
- Are the renewal, termination and transfer conditions reasonable?
- If the franchisor requires you to purchase proprietary inventory, is that inventory useful?
- If the franchisor requires you to meet annual sales quotas, are those quotas reasonable?
Franchisor Support
- Does the franchisor help with site selection, lease negotiations and store layout?
- Does the franchisor provide ongoing training?
- Does the franchisor provide financing?
- Does the franchisor sponsor an advertising fund to which franchisees contribute?
- Are the franchisor's promotional programs strong?
- Does the franchisor have favorable national contracts for goods and services?
