The decision to buy a franchise is one that requires a lot of thought and quality research to ensure you don t regret the commitment two years into a long term contract. There are a number of questions you need to ask yourself and the franchisors (sellers) to determine which business is right for you.
The first part to determining the right franchise fit is to look at what kind of a person you are. Ask yourself the following questions:
What interests, hobbies and passions do I have? Is there a franchise available in my area of interest? There are so many different franchise opportunities available across a whole range of business sectors. Look for the area that suits your personality. You will be making a big investment of time, money and energy so you want to be able to enjoy the business you buy.
How much capital do I have behind me and what start up costs can I afford? There is no point researching franchises that are financially beyond your means. Be realistic about your budget and stick to it.
How many hours a week do I want to work? What days of the week do I want to work?
When you buy a franchise you must commit to being open during the hours that the franchisor (seller) dictates. Find a situation that suits your needs as well as the needs of the company.
Finally, ask your family what expectations they have from a franchise, and what (if anything) they plan to contribute to the business.
Investigating The Franchisor
The second part to finding the right franchise requires you to ask tough questions of the franchisor. This is a person you will be in a business relationship with for a long time; be thorough in your investigation of them and their business practices. Ideally they should furnish you with a Franchise Prospectus when you first express interest in the company.
This prospectus should tell you:
What kind of franchise it is and what type of agreement you will have with the franchisor.
Who the Directors are and what business experience they have.
The company s financial track record.
Start up costs and any other costs to be paid by the franchisee (you).
Any restrictions on activities of the franchisee.
Success rates and numbers of current franchisees.
What kind of training and support the franchisor will provide.
What rights the franchisor has to choose or approve sites for your business.
Terms of the business agreement in regards to termination and renewal procedures.
Financial information about original company location.
Banking information and professional associate list.
Questions to ask the franchisor:
How long have they been in business? How long have they been franchising?
Can you talk to existing franchisees to ask questions about the business?
Where does their main source of revenue come from?
What financial state is the company in? Ask for bank references.
What territory can you operate in? Do you have exclusive rights to that area?
Is training included?
What are the advertising terms and conditions?
What are the ongoing royalties and service costs?
What capital is required and what are the realistic profit projections?
How many other franchisees are there?
Do they have any legal cases against them?
How long will the franchise agreements last?
This list is not exhaustive. Ask as many questions as you can to ensure you invest your money wisely and have many years of good business relations with your franchisor.
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