10 Tips for Researching a Franchise Operation
10 Tips for Researching a Franchise Operation
Conduct Preliminary Research
Ask the franchise company to send you brochures, pamphlets and videos, if possible. Then, locate the nearest two or three franchise operations and visit each. Talk with the franchise holder, the employees and the customers to get their reaction to the product or service. Hint: Ask the franchisee if he or she would purchase the same franchise again.
Study Company Documents
US franchisors are required by law to provide you with documents offering full disclosure of the franchise opportunity. (Laws may differ in other countries). These documents could be called the Offering Prospectus (OP), the Disclosure Document or the Franchise Offering Circular. These papers provide you with a wide range of information about the franchisor. Look for a company that is three years old or more. Senior executives should have positive business experience in the franchise field and have a good record regarding previous litigation and bankruptcies.
Consult with Business Professionals
Take the OP, the Disclosure Document, and the franchise contract to an accountant, attorney, management consultant or other business professional for analyses of the financial and legal aspects.
Learn the Franchisor's Policy Regarding Territory Protection
You'll want to know the franchisor's policy regarding the number of franchise unit's they'll establish within a geographic area. Do you have a protected territory? You don't want to discover that the company has established a similar unit across the street from your operation. Additionally, some franchisors also open and operate company owned stores as well as the franchise outlets. What's their policy regarding company stores?
What Fees Must You Pay?
Expect to pay an initial franchise fee (often non-refundable), as well as fees for startup expenses, inventory, licensing, insurance, and a "grand opening fee" for initial promotion. Anticipate annual expenses such as royalty fees and marketing fees. Find out what portion of your advertising fees goes to your own outlet and what portion goes to national advertising. Hint: Ask about hidden fees.
When Will You Break Even?
Based on your investment and the breakeven analyses in the OP, how long before you reach the breakeven point and start making a return on your investment? Do you have financial strategies that will allow you and your business to survive until the breakeven point? What sort of profits might you reasonably expect to make? Franchisors are not required by US law to offer profit projections to their franchisees. However, if they do, they are required to base their projections on concrete research.
How are Conflicts Resolved?
Is there a Conflict Resolution Policy in place? What do other franchisee's say about the company's approach to addressing conflicts? Under what circumstances can the company terminate your contract? If your contract is terminated, will you lose your investment? When will the contract be up for renewal? Hint: Franchise contracts that are renewed do not necessarily keep the same terms as the original contract. Terms could be less favorable.
Will the Franchisor's Advertising Campaign Benefit You?
You are required to pay a fee towards the franchisor's advertising campaign. Find out the extent to which this campaign will benefit your outlet. Do you have any control over how the advertising dollars are spent? Can you conduct your own advertising? Do you need permission to do so? Do franchisees benefit from any commissions or rebates that the franchisor receives?
What's the History of Failed Outlets? Before investing, find out the number of outlets that have failed. High numbers could indicate systemic problems. Be aware that some franchisors will disguise failed outlets by turning them into company-owned stores. If you are purchasing an existing outlet, be sure to find how many previous operators have operated the service and why they left. Hint: Conduct interviews with people who have recently left or joined the franchise. Be sure to ask if the franchise company is delivering the promised supports and services.
==========================================
How to Write Business Plans, Business Proposals, JV Contracts, More!
No-cost ebook "Beginners Guide to Ecommerce".
Business Writing by Nightcats Multimedia Productions
=========================================
10 Tips for Researching a Franchise Operation - To learn more about this author, visit June Campbell's Website.
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A franchise operation can be an excellent investment for people dreaming of self-employment. Franchise opportunities fall into three basic categories: Product, Service and Wholesale Distribution. The franchise you select must be one that will maintain your interest through years to come. Not even a lucrative franchise opportunity will work for you if you find the business dull or boring. However, like all business opportunities, there are risks involved. You'll minimize the risks by doing your homework before you sign on the dotted line.
Conduct Preliminary Research
Ask the franchise company to send you brochures, pamphlets and videos, if possible. Then, locate the nearest two or three franchise operations and visit each. Talk with the franchise holder, the employees and the customers to get their reaction to the product or service. Hint: Ask the franchisee if he or she would purchase the same franchise again.
Study Company Documents
US franchisors are required by law to provide you with documents offering full disclosure of the franchise opportunity. (Laws may differ in other countries). These documents could be called the Offering Prospectus (OP), the Disclosure Document or the Franchise Offering Circular. These papers provide you with a wide range of information about the franchisor. Look for a company that is three years old or more. Senior executives should have positive business experience in the franchise field and have a good record regarding previous litigation and bankruptcies.
Consult with Business Professionals
Take the OP, the Disclosure Document, and the franchise contract to an accountant, attorney, management consultant or other business professional for analyses of the financial and legal aspects.
Learn the Franchisor's Policy Regarding Territory Protection
You'll want to know the franchisor's policy regarding the number of franchise unit's they'll establish within a geographic area. Do you have a protected territory? You don't want to discover that the company has established a similar unit across the street from your operation. Additionally, some franchisors also open and operate company owned stores as well as the franchise outlets. What's their policy regarding company stores?
What Fees Must You Pay?
Expect to pay an initial franchise fee (often non-refundable), as well as fees for startup expenses, inventory, licensing, insurance, and a "grand opening fee" for initial promotion. Anticipate annual expenses such as royalty fees and marketing fees. Find out what portion of your advertising fees goes to your own outlet and what portion goes to national advertising. Hint: Ask about hidden fees.
When Will You Break Even?
Based on your investment and the breakeven analyses in the OP, how long before you reach the breakeven point and start making a return on your investment? Do you have financial strategies that will allow you and your business to survive until the breakeven point? What sort of profits might you reasonably expect to make? Franchisors are not required by US law to offer profit projections to their franchisees. However, if they do, they are required to base their projections on concrete research.
How are Conflicts Resolved?
Is there a Conflict Resolution Policy in place? What do other franchisee's say about the company's approach to addressing conflicts? Under what circumstances can the company terminate your contract? If your contract is terminated, will you lose your investment? When will the contract be up for renewal? Hint: Franchise contracts that are renewed do not necessarily keep the same terms as the original contract. Terms could be less favorable.
Will the Franchisor's Advertising Campaign Benefit You?
You are required to pay a fee towards the franchisor's advertising campaign. Find out the extent to which this campaign will benefit your outlet. Do you have any control over how the advertising dollars are spent? Can you conduct your own advertising? Do you need permission to do so? Do franchisees benefit from any commissions or rebates that the franchisor receives?
What's the History of Failed Outlets? Before investing, find out the number of outlets that have failed. High numbers could indicate systemic problems. Be aware that some franchisors will disguise failed outlets by turning them into company-owned stores. If you are purchasing an existing outlet, be sure to find how many previous operators have operated the service and why they left. Hint: Conduct interviews with people who have recently left or joined the franchise. Be sure to ask if the franchise company is delivering the promised supports and services.
==========================================
How to Write Business Plans, Business Proposals, JV Contracts, More!
No-cost ebook "Beginners Guide to Ecommerce".
Business Writing by Nightcats Multimedia Productions
=========================================
10 Tips for Researching a Franchise Operation - To learn more about this author, visit June Campbell's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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