|by Franchise Frank
If you are considering purchasing a franchise as a means of starting
your own business then one of the biggest tasks you will face is
choosing which of many opportunities to invest in. Perhaps I can
Many people send me emails asking for the definitive guide to assessing
franchises. They are really looking for a fool-proof method of identifying
the franchisor who guarantees their investment with little or no
risk. I am sorry to say there is little riskless investment in this
world but could I offer a few pointers to evaluating prospective
franchisors so that you can minimise the possibility of making a
bad choice. Among the issues you should consider are the following:
- Is the franchise promotional material professionally prepared
and presented or does it consist of home-produced pictures and
photocopied bits and pieces of mixed information?
- Are the questions you ask at all stages of negotiation openly
and clearly answered?
- Does the franchisor return your calls promptly? Do you feel
he or she or the corporation is readily accessible to you?
- Does the franchisor provide you with a complete or random list
of franchisees in the network and insist that you approach at
least six of your choice to discuss their experience of the business?
- From your conversations with the other franchisees, do you get
a feeling that this is a "happy family", that there
is a strong spirit of co-operation and mutual support?
- Is your lawyer satisfied with the franchise agreement?
- Is this franchise the core business of the franchisor or does
he or she have other business interests? If so, the franchise
may not be receiving the focus it needs. When the franchisor's
eye is on several balls apart from the one in which your life
savings are about to be invested, he or she is not focused properly
on any of them. I am not talking here about large corporations
with subsidiary franchised companies run independently - these
are in fact focused on exclusively by those who run them - but
about the single franchise business with one owner or group of
shareholders. You should be satisfied that your franchisor is
as focused on his or her core business as you will be.
- For every good franchisor with a solid track record, a proven
system, good training, back-up and support there are ten charlatans
who, because their store or coffee shop is trading reasonably
well, have visions of an empire that will yield a quick financial
return for very little effort or expenditure on their part. They
imagine themselves as the next Subway but they won't be! If you
are a potential franchisee make sure you can distinguish between
the real and the disingenuous before you sign anything.
- Irrespective of the type of franchise agreement that is signed,
be it area development, national master or individual franchise,
success in franchising is about partnership. The franchisee must
feel there is a partner at the other end of the phone who has
a vested interest in his or her success. Be very careful of the
"absentee landlord" syndrome. It is the rock on which
many franchisees flounder. Be sure that on-going benefits of the
alliance are tangible, and that there is evidence of constant
change, innovation and product improvement by the franchisor.
- Is there a sense of desperation in the franchisor's attempts
to woo you into the network? Is he or she offering to reduce fees
or urging you to sign the franchise agreement quickly because
there is "standing room" only, with several other entrepreneurs
competing for the opportunity? Do not be hurried or worried into
signing anything in these circumstances. There should be a sense
of mutual enthusiasm to join forces rather than indifference at
one extreme or pressure at the other. Walk away if you sense lack
of interest or experience intense pressure. Remember, there are
nearly 50 franchises listed in Franchise Direct alone. Why not
take a look at several of these to get a flavour of what may be
the right one for you?
- Project ahead to your day-to-day dealings with the franchisor.
Do you envisage them as satisfying and stress-free? Remember,
you may need a great deal of support and encouragement in the
start-up stage of your business. Will you feel comfortable about
calling the franchisor and are you confident you will receive
the guidance you need? Your intuition now is a measure of how
things will be in future.
- Finally, there is something to be learned from astute business
people. They are astute because they are experienced and the most
valuable experience is usually gained when things go wrong. Bear
in mind that the relationship between franchisor and franchisee
is formalised through a partner agreement. You should feel relaxed
and comfortable about your relationship with your franchisor,
your partner. If you don't, if your antennae are twitching, stand
back and ask why. You may not be able to put your finger on something
specific but it is enough that your intuition is sending you signals.
Do not ignore them or you may become astute the hard way!
I hope these hints will help you in your selection of the right
business. Happy hunting!