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Franchisee checklist - assessing the franchisor

Written by: Diarmuid Kieran

Article Overview: How does a would-be franchisee assess which franchisor to go with?

Franchisee checklist - assessing the franchisor

The franchisor's company
1. Is the franchisor soundly financed? Ask to see audited financial records for three years.
2. What is the franchisor's credit rating?
3. Who are the franchisor's accountants, bankers and lawyers?

4. Is the franchisor a subsidiary of another company and if so whom? Is the parent company soundly financed? Ask to see their accounts too.

5. Does the franchisor have associate companies? If yes, who are they and what is the relationship between them and the franchisor?

6. Does either the parent company or any associate operate franchises? If so, would they be in competition with you?
The company's history and experience

7. How long has the franchisor been in this type of business?

8. What business experience and qualifications have the franchise's directors and managers?

9. Have any of the directors or managers ever gone bankrupt?

10. Have they or the company been involved in any litigation or court judgements?
The franchise system

11. Is the franchise operation a success?
12. Does the franchisor still run any units him/herself? If so, how many?

13. Are they buy-backs or failed franchises or is the franchisor keeping prime sites him/herself?

14. How many franchise outlets does the franchisor currently have? How many are in your country or state? What has the trend been in recent years?
Past and future of the franchise system

15. When did the franchisor start franchising?
16. How long has his/her pilot operation been running?

17. Has he/she had any franchise failures or franchisee departures? If so, how many, and why did they fail?

18. How many franchise owner-operated outlets does he/she intend having in the future? Where will they be and over what time-scale will they be developed?

19. What innovations has the franchisor introduced since starting franchising? What plans does he/she have for the future?
Other questions

20. How particular is the franchisor when selecting his/her franchisees? What selection criteria does he/she use?

21. Can you interview some of the existing franchisees?

Too many people rush into franchise agreements without carrying out a thorough investigation into the financial status of the franchisor. Many franchisees trading successfully in their local area find themselves in difficulty if/when the franchisor goes into liquidation. Be wary of franchisors who are not forthcoming with up-to-date financial information.

Related Articles
  Franchisee/Franchisor Relationship Requires Mutual Trust, Respect
  Make the Most of the Franchisee/Franchisor Relationship
  Maintain a good working relationship with your franchisor
  Don't Let the Franchise Fee Scare You!
  Franchisee checklist - the franchise agreement

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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: 50 States - All Franchisees of the U.S. Government - [quote="RussellWebb":1twrc65u]Is this common knowledge in the franchise arena?[/quote:1twrc65u] This is not common knowledge in the franchise industry. I don't even see it this way. I don't think it's a franchisee/franchisor relationship at all. By definition, a franchise is the agreement between 2 legally independent parties which gives: - a person the right to market a product/service using the trademark or tradename of another business (franchisor) - the franchisee the right to market a product/servuce using the operating methids of the franchisor - the franchisee the obligation to pay the franchisor fees for these rights - the franchisor the obligation to provide rights and support to franchisees. The first 2 points don't apply to the federal/state relationship. The last 2 do.
Re: What Franchisors Want From Franchisees - In my experience one of the things franchisors look for is the professionalism of a candidate. I have run across quite a few times where I had a candidate looking a certain franchise and the other person that was looking at the same territory made their decision first and my client was left without a territory. That being said, my client did make their decision, it was just a day too late, but we didn't know that at the time, so the franchisor went to the drawing board and without overloading the market figured out a way to create 2 territories by moving the 1 territory over and establishing another one. Both franchisees were happy and the franchisor got a 2fer. Talking with the franchisor afterward they told me one of the main reasons they did that was because of the responsiveness of my candidate. They say this was very professional and it wasn't just the $$ that made them create the additional territory, although I am sure that played a part, but they really worked with all of the existing franchise owners and the new one and my candidate to get this done.
Re: 10 Tips to Start an Online Business - Thanks for the tips Anya101. They make a useful checklist for anybody building a new website or starting an online business.
Re: Franchising 'where to advertise?' - [quote="theFranchiseMarket":2v907mtu]I love Baseball, but "If you build it, he will come" doesn't neccessarily work at times with website concepts. Simply, find the advertising solution that is right for you. So many times I hear or read "find the franchise that is right for you" but the same can be said of franchisor advertising as well. There are many advertising avenues for franchisors, but just a few are true leaders in the industry.[/quote:2v907mtu] Hi theFranchiseMarket, For those of us who aren't as familiar with how franchises work, can you tell us how an individual franchisee is supposed to market itself? Are there any restrictions from the franchisor? And how much does a typical franchisee rely on the franchisor to create promotional campaigns (e.g. tv commercials, flyers, etc.) in its territory? More importantly, who are the "true leaders in the industry"? Thanks


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