Franchising offers some great opportunities. You get a business model that is tested and proven successful. You get marketing support and potentially good brand recognition from regional or national advertising campaigns that you contribute to. In most cases, you also get a territory, which means that you can be sure that your competition is limited to “the other guys” and not your peers in the franchise.
Here is a checklist of questions you’ll want to ask before you start.
Questions to ask the franchise:
1. How long have you been in business?
2. What income does a typical franchise earn? (Make sure you get certified figures and ask if this is an average amount; often, a franchising company will show you the very best performers).
3. Do I get an exclusive territory?
4. What types of support do I get? (Help with securing capital? Help with local marketing efforts? Help with employee training? Help finding a location? etc.)
5. What are the rights of each party to terminate the franchise agreement? At what cost?
6. Can I sell my franchise to someone else?
7. What is the franchise fee?
8. Do I have to share the profits?
9. How much control do I get over the business versus how much “top-down” decisions are made for me? (This might happen, for example, in marketing, store décor, products you’re allowed to use, etc.)
Questions to ask your potential customers:
1. Have you ever heard of this company before? Are the things you’ve heard mostly good or mostly bad?
2. What companies do you think of when you need (the particular service you provide)?
3. How much are you willing to spend on this service?
Questions to ask yourself
1. Do I see the demand for this product or service staying the same or increasing in the near future?
2. Under what circumstances might demand decrease? (For example, is your service economically sensitive so a recession might decrease business?)
3. Is this a business I can manage doing on my own or do I need to hire other people? (You need to honestly answer this question and decide whether you are a “doer” or a “manager;” both are good qualities but are vastly different and each have their own challenges and rewards).
4. Can I afford the initial cost, the franchise fee, and still pay my bills?
What makes franchising so rewarding is that is allows you the pleasure of starting and owning a business that has a high chance of success. While there is a cost – in fees and the surrendering of some decision-making – franchising can be a great opportunity for many people who want to own a business and spend more time marketing and “doing business” and less time worrying about product line-up, brand image, business model, etc.
