A CHECKLIST OF QUESTIONS TO ANSWER BEFORE YOU BUY A FRANCHISE - Businesses that operate under a franchise model, such as Wendy's, McDonald's, and Jack-In-The-Box, are experiencing phenomenal growth. The individuals who are responsible for the establishment of franchise ideas and businesses are aware of a beneficial thing and are actively promoting this concept. The number of people purchasing franchises for businesses that specialize in virtually any industry imaginable is growing at an alarming rate.
There are some excellent franchises out there. They are very kind and respectful to both the franchisor and the franchisee. The views of others are extremely one-sided. Still others are almost complete cons that will trick you into paying ten to fifty times the real value of the business idea, equipment, or whatever else it is that they are attempting to sell you.
You should learn everything there is to know about a franchise before investing any money in it. Before you make any investments, we have compiled a list of questions that you should be asking and should make sure to get satisfactory answers to.
1. Has your attorney read the franchise contract, gone over it in detail with you, and determined that you and the franchisee both agree to its terms without any reservations?
2. Does the franchise require you to take any actions that are either illegal in your state, county, or city, even to the point where they border on being illegal, or that are otherwise questionable or unwise in their execution?
3. Will the franchise provide you with an exclusive territory for the duration of the franchise period, or will the franchisor be able to sell additional franchises in the territory that you will be operating in?
4. Does the franchisor have any kind of relationship with any other franchise companies that deal with products or services that are comparable to their own?
5. If you answered yes to the questions above, what safeguards do you have in place to protect you from the competing franchising company?
6. If you want to get out of the franchise contract, under what conditions can you do so, and what will it cost you?
Will you receive payment for your goodwill in the event that you sell your franchise, or will you be out of pocket for it?
8. How long has the company been in business that is currently offering you the franchise opportunity?
9. Does the company that is providing you with this opportunity have a track record of treating its other franchisees in an ethical and honest manner?
10. Has the franchisor provided any certified figures indicating the exact net profits of one or more of the franchisees, and have you personally checked these figures with the people who generated them?
11. Will the franchisor provide you with the following types of assistance: a) a program for training management; b) a program for training employees; c) a program for public relations and advertising; d) capital; e) credit; and f) ideas for merchandising?
12. Will the franchisor be able to help you find an appropriate location if that becomes necessary?
13. Does the franchising company have sufficient financial resources to be able to carry out its strategic plans?
14. Does the franchisor have management that is both experienced and thoroughly trained?
15. Specifically, what is it that the franchisor can do for you that you yourself are unable to do?
16. Has the franchisor conducted a thorough enough investigation of you to ensure that you will be able to successfully run the business and make a profit for both of you?
17. Does your state have a law that regulates the sale of franchises, and has the franchisor demonstrated that they have complied with that law to your satisfaction?
18. How much of your own money will you need to put down in order to buy the franchise and run it successfully until your income and expenses are balanced?
If you are able to obtain the responses to all of these questions and are content with the responses you receive, then you are most likely considering investing in a fairly good franchise opportunity. If you have any uncertainty about any of these points, however, you should make sure to investigate it and know the answers for certain before you make any investments or sign any documents.
Investing in a franchise can provide you with a sense of financial stability and, in some instances, a guarantee of profits. According to surveys of businesses, the failure rate for all franchised businesses is less than twenty percent. This is in contrast to a failure rate of between 60 and 80 percent that is experienced annually by ALL new businesses that are started in this country.
The local library is typically a good place to look for franchising directories, which contain information regarding specific franchising ideas and are available to the public. Quite frequently, a notice will be displayed in the franchise outlets in and of themselves.
There is a statistical advantage for you to enter this market if you have the financial means to do so. You are now equipped with some warning signs, including STOP, GO, and CAUTION!
