When you make any major purchase, you should investigate as thoroughly as possible. Buying a franchise is no different. Time spent investigating the industry and doing market research is a necessary part of the purchasing process. Researching will also give you peace of mind as the buy, and help make you more confident in your decision-making process.
What to look for
A prospective franchise should have and established reputation and sufficient capital.
Look for high-quality products or services.
Seek out franchises that have a history of satisfied franchisees. The franchiser should be able to provide a reference list of current and former franchisees. Try to determine if the franchiser cares about the franchisees and their success, or if they are simply trying to expand as quickly as possible at the expense of the franchisees.
Questions to ask
Is there are strong management team, are the consultant well versed in the industry, and is the management team effectively using franchising to expand their business?
How involved are the founders of the franchise? Is there a risk of micromanagement?
Is there enough available capital to support the franchising program?
Is there enough capital to provide appropriate assistance to the franchisees?
Does this franchise have a recognizable brand? Is there a distinctive trade identity that you can depend on as the franchisee?
Does the franchise have a uniform appearance and overall image?
Have the proven methods of operation and management been incorporated into a useful operating manual?
What is the training program like? Is it comprehensive and complete?
Does the franchise have support staff and are they available to visit franchises and offer assistance?
Is there a strong market for the products or services that the franchise offers?
Are the criteria for site selection of franchises based on market and demographic research? Have you looked at the location from multiple angles to determine its profitability?
What is the franchiser’s history and what is their public profile?
What kind of corporate culture exists in the franchise?
Who pays for what in the franchising agreement?
Have you completely researched the product or service that the franchise offers?
How realistic is the advertising and marketing plan?
Are you comfortable with the clauses and considerations set out in the franchise agreement?
Have you developed a comprehensive business plan before entering into negotiations?
Offering Documents
Offering documents are a package of documents that franchiser must provide to franchisees. They must be given at the first meeting where a purchase is being seriously discussed. According to the federal government, as well as state regulations, under the Uniform Franchise Offering Circular (UFOC), the offering documents must contain the history of the franchise, as well as the history of its owners. The documents must also contain procedures for terminating and renewing the franchising relationship, quality controls, fee structures, and financial statements.
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