QUESTIONS TO ANSWER BEFORE YOU BUY A FRANCHISE
Franchise businesses such as McDonald's, Burger King, and
Kall Kwik Printing, 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 numbers.
Some franchises are very good. They treat both the
franchiser and the franchisee very well.
Others are very one-sided.
Others are almost total rip-offs, that trap one into paying ten
to fifty times the actual value of the business idea, equipment,
or whatever it is they are trying to get you to buy.
Before putting any money into a franchise, you should
investigate everything completely.
We've prepared a list of questions you should be asking, and
should get satisfactory answers to before investing.
- Has your lawyer studied the franchise contract, discussed
it completely with you, and do you both approve it without
reservations?
- 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 county or city?
- Does the franchise give you an exclusive territory for the
length of the franchise period, or can the franchiser sell a
second or third franchise in your territory?
- Is this franchiser connected in any way with any other
franchise company handling similar products or services?
- If you answered yes to the above question, what is your
protection against the second franchising company?
- Under what circumstances can you end the franchise
contract, and at what cost to you?
- If you sell your franchise, will you be compensated for
your goodwill or will it be lost to you?
- How many years has the firm offering you the franchise
been in operation?
- Does the company offering you this franchise have a
reputation for honesty and fair dealing among its
franchisees?
- Has the franchiser 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 people?
- Will the franchiser 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.
- If needed, will the franchiser assist you in finding a
suitable location?
- Is the franchising firm adequately financed so that it can
carry out its stated plans?
- Does the franchiser have experienced management
training?
- Exactly what can the franchiser do for you that you cannot
do for yourself?
- Has the franchiser investigated you carefully enough to
assure itself that you can successfully operate at a profit
to both of you.
- Does your area have a law regulating the sale of
franchises, and has the franchiser complied with that law
to your satisfaction?
- 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 of
buying a pretty good franchise idea.
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. Often there will be a notice posted in
franchise outlets themselves.
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!
