Evaluating a Franchise is important. Before you finally sign up for a franchise ask your franchisor these pertinent questions.
o Who owns the trademarks, service marks, etc., and are they federally registered?
o Are there any disputes pending or threatened against the trademarks?
o Are any senior management or key personnel leaving the system?
o Does this company compete with the franchisees in the marketplace?
o Will the franchisor finance any of the costs?
o Is the franchisor willing to negotiate the terms of the franchise?
o Does the franchisor staff attend seminars on franchising and management?
o Do field consultants offer help and guidance or merely act in a regulatory role?
o How many franchises are expected to be added each year?
o Where will they be located?
o What is the success rate of existing franchises?
o What method is used to protect franchisees from poorly performing franchises?
o Is there a franchise owners association?
o Is there a franchise advisory council?
o What is the total investment required to own a franchise?
Furniture, fixtures and equipment
Advertising and brochures
Pre-opening staff costs
Working capital until breakeven
Working capital living expenses
o What are the recurring financial costs, the basis used for calculation, method of payment and frequency of payment:
Must the franchisee purchase products or services from the franchisor:
o Does the franchisor earn income on purchases?
o How much does the franchisor earn?
o How are the products distributed?
o How long does it take for the orders to be filled?
o What other initial or continuing services does the franchisor provide? What do these cost?
About consumer research and marketing:
o What type of consumer research has the company conducted?
o What were the results?
o Has the franchisor conducted any market studies on the territory to ensure that it can support a franchise?
o What are the demographics required to support a franchise?
o What are the traffic counts required to support a franchise?
o What are the location, duration and additional costs of initial training?
o Who must attend the training?
o What is the cost of additional staff attending training?
o What is the training curriculum?
o Who conducts the training and what are their backgrounds?
o Who pays for transportation, room and living expenses?
o Doesthefranchisorprovidetrainingmaterialsfortrainingnewstaffinaddition to the operations manuals?
o Does the franchisor provide hands-on assistance during the pre-opening, grand opening and initial period? Of what type, duration and cost?
About products and services:
o Are there any new products or services under consideration for addition to the franchise?
o When are they going to be introduced?
o What is the estimated additional cost for adding the new products or services?
o Are there any restrictions on the distribution or sale of the product?
o Is there a guarantee or warranty program? How is it administered and what is the cost?
o Is there a minimum that must be purchased?
About advertising and marketing:
o What type of consumer advertising does the company recommend?
o What types of cooperative advertising programs are being used?
o What percentage of sales is recommended or required for advertising or marketing?
o How do the franchisees obtain their sales leads or customers?
o What is the franchisor’s national/regional advertising program and budget?
o What portion of the national/regional advertising contribution is used for administrative/corporate/agency expenses and fees?
o What are the primary advertising/marketing vehicles?
o What is the grand opening advertising program and cost?
o What are the roles and responsibilities of the field staff?
o How many locations does each franchise consultant work?
o What is the background of the franchise consultant I will be working with? Can I meet that person before purchasing the franchise?
o How often does the field staff visit a franchisee’s location?
o What is the additional cost of field services if the franchisee requires it?
o Exactly what kind of assistance is given?
o What kind of supervision or quality control is there?
o What, if any, is the charge for assistance?
o What kind of business management systems are provided to boost sales and profits?