Prospective franchisees need to look carefully at a franchiser’s approach and track record before making any commitment.
Be aware of the following when assessing a franchise opportunity:
- Avoid the hard-sell approach of an organisation that puts a time limit on your decision and offers discounts for a quick commitment.
- Be wary of verbal commitments that will not be in the contract.
- Be cautious of dealing with organisations that are new to franchising and have not fully proved their system with a pilot programme.
- Do consider organisations that have used professional specialist advisers to set up the operation are members of a Franchise Association and have not had any previous failures.
Franchisees also need to assess their own strengths and weaknesses such as the level of support from their family, their personal commitment to the enterprise and their relevant skills and experience for the particular franchise.
They need to consider whether the branded product or service offered by the franchisor is well known and whether it is likely to continue being successful, particularly in view of the existing or perceived competition.
Franchisors have become less concerned about the age or gender of applicants. They are more interested in whether people are self-motivated, hard workers and financially aware. Increasingly they are looking for selling and marketing experience that can be harnessed to expand the system.
You should address the issues raised by the following 20 questions:
- What kind of initial services do I get for my money?
- What market development advice and assistance can the franchisor give me?
- What trade marks/names/copyright material/know-how do I get? Is the franchisor the registered owner of the copyrights and trademarks?
- Am I restricted to a territorial area / premises and what happens if I have to change premises?
- Am I restricted to the franchisor’s goods only?
- Do I have to organise product supply?
- Do I get exclusive rights to a territory?
- Are there minimum sales targets and what happens if I do not reach them?
- Can the franchisor terminate and why?
- If I go out of business what obligations continue?
- Do I have automatic right of renewal after the franchise period is up?
- If I do not renew the franchise can I set up a similar type of business nearby or am I contractually bound not to do so for a period of time?
- What experience does the franchisor have?
- Is the franchisor a member of the Irish Franchise Association or the British Franchise Association?
- How many franchisees are there?
- How successful are any other franchisees?
- Can I discuss matters openly with the franchisees professional advisors and other franchisees?
- Is the franchisor properly financed?
- Are the major banks prepared to accept the franchisor’s standard franchise package?
- If there are differences or disputes between the franchisor and myself how are these settled?
Related Article: Preparing a Detailed Business Plan