Top 20 Checklist

Before you  purchase your franchise you need to tick off all the must-do items. Have you checked the following?

The initial purchase

1.    Are you confident in the franchisor? (how long franchising, what competitors, complk to Franchising Code of Conduct, expansion plan)

2.    Have you seen a disclosure document?

3.    Have you evaluated the financial returns? (total investment, turnover, profitability, return on investment (ROI))

4.    Do you know all the expenses franchisees are required to pay? (initial franchise fee, marketing royalties, advertising levy, training fees, equipment costs, trading stoc legal costs on assignment, insurance etc)

5.    Have you worked out your operating costs? (wages, superannuation, tax, employee entitlements, rent, insurance, IT, signage and uniforms, leased equipment)

6.    Do you know the term of the agreement? (how long is the agreement, is there a renewal option, are there renewal pre-conditions)

7.    Is the business operating from fixed or mobile premises? (check ownership or leasing arrangements — is it leased direct to the franchisee or sub-let, who makes repairs)

8.     Are you working within a territory? If so, is the area exclusive?

9.    Are you restricted in your product purchase? (can you purchase outside the recommended supplier, does the franchisor receive a supplier rebate, are you selling authorised products or authorised services, do you have to purchase equipment from the franchisor)

10.    Are you required to reach a minimum performance level? (is this achievable)

11.    What are the franchisee and franchisor obligations?

12.    What training is available and who pays for it?

13.    Who owns the intellectual property and what is licensed to the franchisee? (trademark, business name, website, operating manual etc.)

14.    What marketing will the franchisor implement? (national or statewide, is there a marketing fund to promote the franchise, how are enquiries allocated)

15.    Who pays for the marketing? (is there a franchisee contribution, what costs are taken out)

16.    What is the dispute resolution process? (who is involved, where does it take place)

17.    Do you know what it is like to be a franchisee? (speak to past and present franchisees, positive and negative, spend a day with a franchisee)

Ending it all

18.    Can you assign the franchised business? (does the franchisor have first right of refusal)

19.    How can the franchisor or franchisee terminate the Franchise Agreement?

20.    What restrictions are there on the franchisee and guarantor operating a similar business? (if so, for how long, within what area)

Courtesy of Mason Sier Turnbull