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CHECKLIST OF QUESTIONS TO ANSWER BEFORE YOU BUY A FRANCHISE

Franchises such as Costa, McDonald's and Kall-Kwik are booming and offer fantastic business opportunities. Franchises for just about every conceivable kind of business are being sold in ever increasing numbers. Our UK High Streets abound with franchisees and often we don't know that they are independently owned under a national franchise organisation.

Some franchises are excellent and treat both the franchisor and the franchisee very well. Others are rather one-sided prefer to receive their royalties without offering the neccessary support and back-up. Beware of those that trap one into paying ten to fifty times the actual value of the business idea and equipment, or what ever it is they are offering.

Before investing money into a franchise, investigate them as much as you can. It is worthwhile chatting with other franchise operators and get a feel of what they are about. There are a number of questions you could ask and should get satisfactory answers before progressing..

1. Has your solicitor studied or drafted the franchise contract, discussed it completely with you, and do you both approve it without reservations?

2. Does the franchise require you to take any steps which are either illegal or even border line on illegal, or are otherwise questionable ?

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? What if you buy franchise A and then he sells another opportunity in franchise B?

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? (Remember, you can ask other franchisees).

10. Has the franchisor shown you any certified audited figures indicating exact net profits of one or more of its franchisees, 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. How much equity capital will you need to purchase the franchise and operate it until your income equals your expenses?

If you achieve 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.
Information regarding specific franchising ideas can be found in the franchising directories, which are generally available at the local library and online.
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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