How will you find the right franchise for your needs? When you get close to selecting the business, there are some important questions to ask.
It pays to do plenty of research in the process of choosing the franchise model because what is a perfect match for someone else might not be a good fit for you.
And that’s when research into the business, the people running the organisation, the structure of the business, and the market potential is so important.
Often referred to as due diligence, the process of researching the business opportunity gives a franchise buyer the best chance of making an informed decision, and minimises the risk.
Of course there is always some risk attached to any venture, and despite the brand name, the back up and support that is part of a franchise operation, franchises are not guaranteed successes.
So what questions should you be asking in the process of conducting due diligence?
10 questions about the franchise
- Can the business deliver a profit?
- What is the source of the revenue?
- What franchise and management experience exists among the franchise head office team?
- Does the franchisor comply with the necessary regulations?
- Are all the required documents up to date?
- What level of support does the franchisor provide?
- What initial training is available?
- How happy are current franchisees?
- What percentage of franchisees renew their agreements?
- Are there many disputes in the franchise system?
6 questions about a specific franchise outlet
- Is the location right for the business?
- Who will hold the head lease?
If it’s an existing business..
- Does it show a healthy cash flow?
- What information is available about staff salaries and benefits?
- Are there any hidden liabilities in the business?
- Are there any legal proceedings against the seller?
These questions are just a taster of some of the issues any franchise buyer needs to consider. The more questions asked, the greater the insights into the prospective investment.
There will come a point where the average franchise buyer needs some expert opinion and then it is important to seek advice from professional, franchise-experienced lawyers and accountants.