The Franchisor and The Franchisee
When assessing a potential franchise business ask the following questions. You should build up a good collective profile that will indicate the strength of appeal.
- How experienced is the franchisor? What is the track record of the franchise? Is there steady growth?
- Is the franchisor financially sound? Can you check from recent accounts? Can your accountant talk to his/her accountant?
- Is the deposit paid to the franchisor fully refundable?
- Does the franchisor have enough experience within the organisation to provide ongoing support?
- Is there sufficient advertising? Does the franchisor contribute?
- Is training provided - initially and later? Who pays? How extensive is the training?
- Is there a uniform performance monitoring system? What are the arrangements for providing field support?
- How many outlets are there? How many are company-owned?
- What are the development plans for the next five years?
- How are franchise owners selected?
- How many failures have there been? What are the details? (These should be listed in the Disclosure Document)
Speaking with existing franchise owners will also give you some good information. Make sure that the franchise owners are of your choice. Ask:-
- How did actual cost of investment compare with the cost proposed?
- How accurate were profit/loss cashflow estimates?
- How good was initial and subsequent support?
- What is the franchisor like to work with? Accessible? Fair? Organised? Responsive?
- How good are the rest of the franchisees? Do they make a good team?
- Is the franchisor a good leader?
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