You are looking for THE ideal franchise business. You’ve probably already got an idea of the type of business you want. Of course you have to be passionate about the product and the brand, however there is a bit more to look at if you want to have a really solid franchise investment for your future.

You will be told to do your due diligence to make sure the brand is right for you, but what does that really mean?

You will be given a disclosure document from the franchisor and you will be advised to get accounting and legal advice.

However, beyond talking to your accountant and lawyer, here are two simple ways you can get the information you need to make a logical decision:

1. Talk to as many franchisees as you can.
2. Talk to the franchisor.

You may need to ask many questions, here is a list of questions that you can ask the Franchisees and the Franchisor.

• Are the franchisees happy?
• Are the franchisees profitable?
• Has the average franchisee profitability improved recently and over time?
• Do the franchisees have good things to say about the franchisor and the brand?
• What is the franchisor’s experience in the industry?This should be listed in the disclosure document.
• In the disclosure document, how many franchise businesses were transferred, ceased to operate, terminated, not extended, brought back or acquired by the franchisor? Ask yourself – is this is a reasonable number for the size of the franchised group?
• Does the franchisor understand the financial model for the franchisee and the franchisor? The easiest way to find this out is to listen to whether the franchisor talks about the franchisees needing to make a certain amount of profit to be successful.
• Does the franchisor make decisions that are best for the majority of the group rather than for a few individuals?
• Is there a relevant and up-to-date operations manual with firm procedures for all the team to access? Are the manuals specific to the business to cover management, policy, administration, sales and customer service, marketing, accounts, operations, quality control, training and public relations actions?
• Does the franchisor have the right organisation in place for growth and are the right people in place to support the system?
• Are there enough field support staff to assist the franchisees? Most retail franchise systems require a field support person for every15 outlets however the number of outlets for field support personnel could be much higher for mobile or service based franchises.
• Does the franchisor have long term plans that are achievable and being implemented?
• Does the franchisor operate with real statistics that are measurable and benchmarked? The minimum KPIs would be turnover, number of customers or transactions, average value per transaction, wages percentage, cost of goods percentage and net profit.
• Does the franchisor back up his decisions with evidence and statistics?
• Do the franchisor and the franchisees have open and transparent communication with each other? Is it easy to pick up the phone to talk to someone in the franchisor’s office?
• Are there regular franchise conferences? Most franchised brands try to hold quarterly conferences, some will need fewer, some more conferences. Ask the franchisees if they feel there is enough regular communication.
• Is there an advertising and marketing fund in place that is management effectively and efficiently for the brand with regular reporting to the group as to how the funds are spent? If the franchisor is only reporting the advertising and marketing fund expenditure once a year, this could be too late for feedback to be given by franchisees.
• Is there a local area marketing component? Franchisees do have to do local promotions, they can’t leave it all for the fanchisor to manage.
• Can the franchisor say why he or she runs the business – is there a real purpose beyond making money?
• Are there growth opportunities for the brand?
• Are there initiatives that bring about growth and profit?
• Are the franchisees encouraged to bring initiatives to the franchisor?

There will always be negative comments from some franchisees. Not all people are positive thinkers! Your job is to work out if the negatives are valid or not so valid.

You will find that positive comments come from franchisees who work hard and follow the franchisor’s system; they know franchisees are responsible for their business.

If you can get a majority of satisfactory answers to these questions, you will probably want to join the group. Back that up with your accountant’s advice and lawyer’s advice (providing they are franchising experts)and you will be able to make a decision to either walk away or proceed with confidence.

Then the real fun starts of hard work and following the system for your own success!