A Checklist to Evaluate a Franchise
Considering Several Business Opportunities? Compare These Points
Selecting the right franchise opporunity is the franchisee's first shot at success. Pick one that is troubled, or has grown too fast to sustain itself and trouble follows. But pick one that's up-and-coming, that's got the proven systems and plans in place, and the future looks much brighter.
This step, far more than any others, is one that the potential franchisees must take on his or her own. Yes, franchise consultants can help track down information on some of these topics, but making the decision of which franchise to select ultimately falls to the franchisee.
No matter what franchise industry is under consideration, evalute the franchises with answers to these questions:
- How old is the company? How many years did it work as an independent business before offering franchise business for sale?
- How many franchisees are there in the system? What kind of franchises do they offer?
- How many franchisees have left the system? Why?
- What is the franchise fee and what does it cover? (Don't make a decision solely on the cheapest; know what the franchise fee covers as well.)
- How many multi-unit franchisees does it own? (This can be a huge signal that franchisees have worked one franchise and found success.)
- How many company-owned outlets are there?
- Who are the people behind the management of the franchise business for sale offers?
- What are their qualifications?
- Are there any legal cases pending against them?
- How many cases have the franchisor and franchisees fought with each other? (Again, an area that needs more exploration. Don't discount a franchisor that may have had suits against it; there are two sides to every story, so ask questions if this area brings concern.)
- What training does the franchisor provide?
- What is the on-going support?
- What is the brand position of the company?
- Does it provide protected territory?
- What is the territory size?
- Where are raw materials sourced? Do franchisees have the ability to choose their own suppliers?
- Does the designated supplier provide any discounts?
- Does the franchisor offer financial assistance?
- Does the franchisor provide real estate support?
- What is the marketing support?
- How many employees are needed?
- What employee recruitment is offered?
- Who will take care of the insurance and bonds of employees (especially in service sectors such as senior care or maid service)?
- What is the vision of the company?
- What is the royalty fee?
- What is the advertisement cost?
- What is the marketing plan and how much freedom do franchisees have to market on their own? Is there a fund for local marketing efforts?
- How many years is the franchise agreement for?
With answers to these questions in hand, its easier to compare -- and to make sure the best opportunity is chosen.
