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How to buy a franchise
HOW TO BUY A FRANCHISE
A Checklist Of Questions To Ask And Get Answers Before You Sign The Papers
Franchise businesses such as Wendy's, McDonald's and Jack-In-The-Box
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 franchisor and
the franchisee very well. Others are very one-sided. Still others
are almost total rip-offs that trap one into paying ten to fifty
times the actual value of the business idea, equipment, or what ever
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.
1. Has your attorney studied the franchise contract, discussed it
completely with you, and do you both approve it without
reservations?
2. 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 state, county or city?
3. Does the franchise give you an exclusive territory for the
length of the franchise period, or can the franchisor sell a
second or third franchise in your territory?
4. Is this franchisor connected in any way with any other
franchise company handling similar products or services?
5. If you answered yes to the above question, what is your
protection against the second franchising company?
6. Under what circumstances can you end the franchise contract,
and at what costs to you?
7. If you sell your franchise, will you be compensated for your
goodwill or will it be lost to you?
8. How many years has the firm offering you the franchise been in
operation?
9. Does the company offering you this franchise have a reputation
for honesty and fair dealing among its franchisees?
10. Has the franchisor 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?
11. Will the franchisor 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?
12. If needed, will the franchisor assist you in finding a
suitable location?
13. Is the franchising firm adequately financed so that it can
carry out its stated plans?
14. Does the franchisor have experienced management, trained
in-depth?
15. Exactly what can the franchisor do for you that you cannot do
for yourself?
16. Has the franchisor investigated you carefully enough to assure
itself that you can successfully operate at a profit to both
of you?
17. Does your state have a law regulating the sale of franchises,
and has the franchisor complied with that law to your
satisfaction?
18. 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 about buying a
pretty good franchise deal. 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!
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