There are many reasons why people buy franchises, and of the dozens of franchises that open for business every day worldwide, there are many reasons why some of those new franchises do not live up to their owners’ expectations.
If you’d like to protect yourself from becoming a disappointed (possibly even a disgruntled) franchisee, it’s important to know what you expect of a franchise company before acquiring a franchise. So here’s a list of 10 items that you should investigate before you invest your money.
- Financially Sound. Will the franchisor be around in a year or three? It makes me nervous when a franchisor has to sell franchises just to meet the overhead.
- Leadership. Who’s behind the curtain at the franchisor? If the founder is still running the business, what happens when he/she decides to retire? Or dies? Does leadership actually exist within the company?
- Culture and Values. Has the franchisor actually created a team of disciplined and ethical people to develop the franchise? What’s the culture, what are the values, and do they meet your expectations?
- Five Year Plan. Where’s this company going? How’s it going to compete in the future? What’s the role for franchisees five to ten years from now?
- Return on Investment. If you invest $250,000, including your own cash and some borrowed money (which you must pay back), when will your investment pay off?
- Operating System. Few things are more important than the franchisor’s system for conducting business. Does the company have a good system?
- Training & Support. You’re going to need to know how to build the business and it won’t happen overnight. Does the franchisor actually provide skilled people who know how to train and support you?
- Brand Name Awareness. Will people know the name of your business and what it does? Is the franchisor investing in the brand?
- Attraction. What is it about the business that will attract customers? Will anything? What attracts you? Is it enough to keep you and customer attracted long term?
- Investment in Franchisees. What’s the company do with your franchise fee? Is it re-invested in you? Ongoing, does the company invest in its franchisees?
You’ll find insights (but not necessarily real answers) to all of these issues and many others when you read the franchisor’s disclosure document. You’ll need to do some investigating to get the real answers. To help you do the investigating, I’ve written Buy “Hot” Franchises Without Getting Burned, and 101 Questions to Ask Before You Invest in a Franchise.
Before you invest in a franchise, make sure you know what to expect. Otherwise, you’re likely to be disappointed.Tags: Ideas and information
This post was written by Dr. John Hayes