BEFORE YOU BUY A FRANCHISE
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 prof
its
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!ou
cannot do for yourself?
16. Have the franchisor investigated !!!!