A Checklist of Questions to Answer Before You Buy A Franchise
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
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. The following is a list of
questions you should be asking, and should get satisfactory answers
to before investing in any franchise:
1. Has your attorney studied 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 on
illegal, or are otherwise questionable or unwise in your state,
county, or city?
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
4. Is this franchisor connected in
any way with any other franchise company handling similar products
5. If you answered yes to the above
question, what is your protection against the second franchising
6. Under what circumstances can you
end the franchise contract, and at what are the costs to
7. If you sell your franchise, will
you be compensated for your goodwill or will it be lost?
8. How many years has the company
offering you the franchise been in operation?
9. Does the company offering you
this franchise have a reputation for honesty and fair dealing among
10. Has the franchisor shown you
any certified figures indicating exact net profits of one or more of
its members, and have you personally checked the figures with these
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
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. 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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Article written by Isabel M. Isidro. Published with permission from Power HomeBiz Guides. http://www.powerhomebiz.com