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QUESTIONS TO ASK BEFORE YOU BUY A FRANCHISE
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Franchise businesses such as Wendy's, McDonald's and Jack-In-The-Box
are booming. The people setting up franchise ideas and businesses
know a good thing, and are really promoting this idea. Franchises
for just about every conceivable kind of business are being sold in ever
increasing numbers.
Some franchises are very good. They treat both the franchisor and the franchisee very well. Others are very one-sided. Still others are almost total rip-offs that trap one into paying ten to fifty times the actual value of the business idea, equipment, or what ever it is they are trying to get you to buy. Before putting any money into a franchise, you should investigate everything completely. We've prepared a list of questions you should be asking, and should get satisfactory answers to before investing. 1. Has your attorney studied the franchise contract, discussed
it completely with
2. Does the franchise require you to take any steps which are either illegal or even border on illegal, or are otherwise questionable or unwise in your state, county or city? |
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3. Does the franchise give you an exclusive territory for
the length of the franchise
period, or can the franchisor sell a
second or third franchise in your territory?
4. Is this franchisor connected in any way with any other
franchise company
handling similar products or services?
5. If you answered yes to the above question, what is your
protection against the
second franchising company?
6. Under what circumstances can you end the franchise contract,
and at what
costs to you?
7. If you sell your franchise, will you be compensated for
your goodwill or will it
be lost to you?
8. How many years has the firm offering you the franchise been in operation?
9. Does the company offering you this franchise have a reputation
for honesty and
fair dealing among its franchisees?
10. Has the franchisor shown you any certified figures indicating
exact net prof its
of one or more of its members,
and have you personally checked the figures
with these people?
11. Will the franchisor assist you with: a) A management
training program; b) An
employee training program;
c) A public relations and advertising program;
d) Capital; e) Credit; f)
Merchandising ideas?
12. If needed, will the franchisor assist you in finding a suitable location?
13. Is the franchising firm adequately financed so that
it can carry out its stated
plans?
14. Does the franchisor have experienced management, trained in-depth?
15. Exactly what can the franchisor do for you that you cannot do for yourself?
16. Has the franchisor investigated you carefully enough
to assure itself that you
can successfully operate
at a profit to both of you?
17. Does your state have a law regulating the sale of franchises,
and has the
franchisor complied with
that law to your satisfaction?
18. How much equity capital will you need to purchase the
franchise and operate
it until your income equals
your expenses?
If you can get the answers to each of these questions, and those answers satisfy you, then you're probably thinking about buying a pretty good franchise deal. However, if you're in doubt about any of these points, be sure to check it out and know the answers for certain before you invest or sign anything.
Buying a franchise can give you a measure of security, and in some cases, sure-fire profits. Business surveys show that fewer than 20 percent of all new franchised businesses fail. This is in comparison to a 60 to 80 percent failure rate for all new businesses started in this country each year.
Information regarding specific franchising ideas can be found in the franchising directories, which are generally available at the local library. Often there will be a notice posted in franchise outlets themselves.
If you can afford the entry into this business, statistics are on your side. You are now armed with some CAUTION and STOP and GO signs!
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