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ASSESSING FRANCHISE OPPORTUNITIES

by Franchise Frank
 

If you are considering purchasing a franchise as a means of starting your own business then one of the biggest tasks you will face is choosing which of many opportunities to invest in. Perhaps I can help.

Many people send me emails asking for the definitive guide to assessing franchises. They are really looking for a fool-proof method of identifying the franchisor who guarantees their investment with little or no risk. I am sorry to say there is little riskless investment in this world but could I offer a few pointers to evaluating prospective franchisors so that you can minimise the possibility of making a bad choice. Among the issues you should consider are the following:

  • Is the franchise promotional material professionally prepared and presented or does it consist of home-produced pictures and photocopied bits and pieces of mixed information?
  • Are the questions you ask at all stages of negotiation openly and clearly answered?
  • Does the franchisor return your calls promptly? Do you feel he or she or the corporation is readily accessible to you?
  • Does the franchisor provide you with a complete or random list of franchisees in the network and insist that you approach at least six of your choice to discuss their experience of the business?
  • From your conversations with the other franchisees, do you get a feeling that this is a "happy family", that there is a strong spirit of co-operation and mutual support?
  • Is your lawyer satisfied with the franchise agreement?
  • Is this franchise the core business of the franchisor or does he or she have other business interests? If so, the franchise may not be receiving the focus it needs. When the franchisor's eye is on several balls apart from the one in which your life savings are about to be invested, he or she is not focused properly on any of them. I am not talking here about large corporations with subsidiary franchised companies run independently - these are in fact focused on exclusively by those who run them - but about the single franchise business with one owner or group of shareholders. You should be satisfied that your franchisor is as focused on his or her core business as you will be.
  • For every good franchisor with a solid track record, a proven system, good training, back-up and support there are ten charlatans who, because their store or coffee shop is trading reasonably well, have visions of an empire that will yield a quick financial return for very little effort or expenditure on their part. They imagine themselves as the next Subway but they won't be! If you are a potential franchisee make sure you can distinguish between the real and the disingenuous before you sign anything.
  • Irrespective of the type of franchise agreement that is signed, be it area development, national master or individual franchise, success in franchising is about partnership. The franchisee must feel there is a partner at the other end of the phone who has a vested interest in his or her success. Be very careful of the "absentee landlord" syndrome. It is the rock on which many franchisees flounder. Be sure that on-going benefits of the alliance are tangible, and that there is evidence of constant change, innovation and product improvement by the franchisor.
  • Is there a sense of desperation in the franchisor's attempts to woo you into the network? Is he or she offering to reduce fees or urging you to sign the franchise agreement quickly because there is "standing room" only, with several other entrepreneurs competing for the opportunity? Do not be hurried or worried into signing anything in these circumstances. There should be a sense of mutual enthusiasm to join forces rather than indifference at one extreme or pressure at the other. Walk away if you sense lack of interest or experience intense pressure. Remember, there are nearly 50 franchises listed in Franchise Direct alone. Why not take a look at several of these to get a flavour of what may be the right one for you?
  • Project ahead to your day-to-day dealings with the franchisor. Do you envisage them as satisfying and stress-free? Remember, you may need a great deal of support and encouragement in the start-up stage of your business. Will you feel comfortable about calling the franchisor and are you confident you will receive the guidance you need? Your intuition now is a measure of how things will be in future.
  • Finally, there is something to be learned from astute business people. They are astute because they are experienced and the most valuable experience is usually gained when things go wrong. Bear in mind that the relationship between franchisor and franchisee is formalised through a partner agreement. You should feel relaxed and comfortable about your relationship with your franchisor, your partner. If you don't, if your antennae are twitching, stand back and ask why. You may not be able to put your finger on something specific but it is enough that your intuition is sending you signals. Do not ignore them or you may become astute the hard way!


I hope these hints will help you in your selection of the right business. Happy hunting!

 
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Franchise Frank is a regular columnist on Franchise Direct where he provides advice to franchisees and franchisors alike.

Franchise Direct is a comprehensive and dedicated online franchise resource including a directory of high quality franchise opportunities. The site can be visited at www.franchisedirect.com

 
 
 
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