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Franchisee Checklist - assessing the business proposition

Written by: Diarmuid Kieran

Article Overview: How does a would-be franchisee assess the business viability of a franchise?

Franchisee Checklist - assessing the business proposition

Financing the business
1. What is the total cost of establishing a franchise operation?
2. What is included in this cost?
3. How much working capital is required?
4. What costs will be incurred in addition to the cost of establishing the business?
5. What financing arrangements are available and what are the repayment terms? Will security be required?
6. Is there a deposit? If so, will the deposit be forfeited if the venture does not go ahead?
7. How soon will the franchisee have to spend money on replacing equipment or refurbishing the business? How often in the past has re-equipping or refurbishment of franchise units been required? How much did it cost?


8. What gross margin can be expected from the business?
9. What are the expenses associated with the business?
10. What level of turnover is required to break even?
11. Are accounts available to confirm these projections?
Franchise fees
12. What is the initial franchise fee?
13. What are the on-going fees and how are they calculated?
14. Is there an advertising/marketing levy? How much is it?
15. Does the franchisor have a mark-up on product sales to the franchisee? If so, how much is it and what protection does the franchisee have against unfair price increases?
16. Does the franchisor take commission from suppliers of goods or services to the franchisee?
17. Is the franchisee obliged to pay a minimum on-going franchise fee or purchase a minimum amount of goods?

Getting Started


18. Who finds the location; is it the franchisor or franchisee?
19. What is the franchisor's procedure for preparing the franchisee for starting operations?
20. How long will it take from signing an agreement to opening the business?
21. What initial services are provided?
22. What will the initial training include and how long will it last? Does the franchisor provide training for the franchisee's staff?
23. Who pays for training?
Operating the business
24. Does the franchisor provide an operations manual?
25. How often will it be updated?
26. What will the business's opening hours be?
27. How will accounting and record-keeping be managed?
28. What restrictions will there be on products sold by the franchisee?
29. What national advertising and promotional support does the franchisor provide?
30. What help will the franchisee receive with local advertising and promotion? What point-of-sale and promotional literature is provided?
31. How much does the franchisee have to pay for promotional material?
32. Who are the head office team and field support staff? Is it possible to meet them?
33. What other systems are there for franchisees to communicate with the franchisor and each other?

Answers to the above questions should be provided by you in your business plan. Do not use a business plan prepared for another location and adapt it with minor changes. One of the advantages of franchising is the fact that other people have tried and tested the concept. You do have a template to work from but you must refine and develop your information for the specifics of your own location.
The franchise agreement forms the foundation of the relationship between franchsor and franchisee. It incorporates all the obligations of the franchisor and franchisee, the rules governing the way the business is conducted and the operational procedures and controls to be used in the business.

Related Articles
  Franchisees and The 90 Day Window
  Your pre-call & post-call checklist
  Franchisors Must Document Everything
  Franchisee/Franchisor Relationship Requires Mutual Trust, Respect
  The franchise sale

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Related Forum Posts
Protecting IP - Dear BigJim 22 Sure as long as it is in the Franchise agreement... ie wht you are offering as Francisor and what their obligations are as Franchisee It is all in the agreement........ take care Ian
Re: This is Marketing Warfare! - Thanks Rita. The Fedex example was perfect to describe unique selling proposition.
How do you set a value on a business? - Hello there! I have a friend that's looking to sell their business. I would like to know how a business gets valued. Can someone help me here? Here's some fairlyaccurate numbers: Gross sales: $153,000 (3 year avg) Income: $75,000 (3 year avg) I've heard that there's a ratio that can determine the value. Does anybody know what it is? The buyer wants to see P&L's. Is their some type of disclosure agreement that protects the seller... How is this typically done? After all, the buyer is a competitor... Buyer has suggested deposit, then pmt plans. I'm under the impression that this is common practice in the sale of a business. If so, what's the best way to approach this proposition as a seller? Thanks in advance for your feedback!
Re: Another Wordpress Website! - Hi David - no problem, happy to help! One other thought came to mind that I forgot to mention: I would probably take out the freelance English consultant. Here's my thinking: If you can get a ton of targeting traffic to your websites as your articles suggest then why isn't it enough to make a full time business from? I think it hurts the credibility of your value proposition if you're saying that you're not doing this full time. Just my thoughts - again, I don't know anything about PLR so I could be way off base here, maybe this is the norm.
Your advantage over others - Sell using your USP - unique selling proposition. Why should people buy from you, instead of your competitors? Think about it, why are you so great? It may be a hard question, but finding the answer can multiply the effectiveness of any advertising or marketing activities you undertake.


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