Franchising

When looking for a potential business or franchise there may be many questions that one asks themselves, we are going to look over one of the major mistakes that has been attributed to the franchise ideas not working and the potential owner losing out on their investment.

To make sure that the franchise is a success the franchise companies should make it as easy as possible for the potential franchisor to understand and avoid pitfalls when starting up their franchise ideas. All franchise companies will have a disclosure that details their responsibilities and the potential franchisors responsibilities, in this document there will be a part concerning 'past, current and future franchises'. This section should detail information about the present franchises that are currently operating under the franchise companies name.

It is vital that these franchises are discussed and gone through in detail. You must bring up any concerns that you may have with the current franchise ideas and what is currently happening with the franchises that are in operation. It will be beneficial if the franchisor gives you a tour of a current franchise that is operating, you should ask to see more than one franchise so that you can get a better idea of how each one works in different locations. Take notes when you are given this tour so that you can get back to the franchisor with any concerns you may have, you might ask questions on the tour but questions like 'how much money do you earn?' might be better directed straight at the franchisor instead of at the franchisee on the tour to avoid embarrassment.

When taking these tours or asking other franchise companies questions you must take into account if these franchisees are benefiting by helping solicit new franchisees. Many franchise companies give out extra incentives, sometimes cash, to franchisees to sell the franchise ideas to other potential candidates. It is best to ask them directly if they are benefiting from giving you these answers and information.

Other franchises under the same name must be contacted as well. These franchises that have not been used to solicit the franchise will be more beneficial as they will give you a clearer idea of the company and how they operate. Under the disclosure document there should be a list of these franchise companies. You must contact these companies as these will be an unbiased source of information, you will be able to get information that is not in the disclosure about the franchise through the questions you ask.

Ask questions such as, 'why this location?', 'have you been in business a long time?', 'are you doing well or not?', in regards to the last question find out why they are doing well, what strategies they have put in place and what sort of turnover they are achieving. You should also determine reasons why they are not doing well, question the franchise influences on the new franchisee, has there been enough support and has the franchisor done everything they said they would do?

Make sure you visit and talk to other franchise companies before investing in the franchise, not finding out this information is a major mistake that some potential franchisees make, don't let it be you.