Questions To Ask When Buying A Franchise.
Introduction.
Whether you’re using the internet, a franchise trade exhibition or responding to adverts in the local or national press; there are some questions you should ask yourself and the company you’re buying the franchise from - before signing any agreements or contracts. Buying franchise businesses can, quite rightly, be a quick and simple process. However, you will be investing your money in it, whether from hard-earned savings or a loan, so it’s in your own interests to be sure that you fully understand franchise terminology and what you are buying into.
Questions to ask yourself.
The key question you must ask yourself is; which sort of franchise opportunity will best suit me? The answer to this is not about whether you want a catering franchise or a fitness one - they are industry sectors - but it is to do with the different types of franchises available. Your decision here will probably be based on your previous experience and level of performance in jobs you’ve previously done. The types of franchise are:-
- Investment franchise - where you’ll manage a team of people to do the actual day-to-day running of the business for you. eg. Typically a hotel franchise - but are you a good manager, have you management experience?
- Executive franchise - providing professional services to others. eg. Typically law or accountancy firms - are you experienced and qualified?
- Retail franchise - many people buying a franchise chose this option. You might be able to work on your own in this franchise or employ a small number of people. eg. Typically fast food or printing outlets - at least initially, these often require a 24/7 approach to the work. Are you able to fully commit all of your time to the franchise to make it successful?
- Distribution franchise - in effect you’re sub-contracted to work from a depot, owned and stocked by the franchisor, selling and delivering goods on their behalf. These are often some of the lowest cost franchises available. eg. Food or Gift sales or just about anything that can be sold - do you have sales experience, are you a good salesperson?
- Depot franchise - you would operate from your own depot, but have the help of the franchise in gaining new business/customers. eg. Typically a courier service -have you got good planning and organizational skills?
- Job franchise - usually a one-person business that can be operated from home. eg. Typically internet based work or mobile car repairs etc - are you a self-motivated type of person that will get on with it?
Having established which type of franchise you want then you can decide on the industry sector best suited to you to work in. Finally, you should do some market research to establish that there is a need and there will be customers when you open your franchise. After all, opening a pet grooming franchise in an area where people don’t have pets might not be the best idea!
Questions to ask the franchising company.
Using a well respected and established franchise sales agency is always to be recommended. Today by searching on the internet not only will you find loads of franchise opportunities but also some excellent franchise agencies. Before actually buying a franchise business there are some facts you should get established from the franchise seller. These include:-
- How much will it cost to buy a franchise?
- Will there be any performance expectations placed on you as a condition of buying the franchise?
- What training and support will you get from the franchising company?
- What are my rights if I buy into a franchise?
- What are the franchise company’s business methods?
- How long has the franchising company been operating?
- How many franchises has the company sold?
- How successful/profitable have those existing franchises been and can you see any audited accounts. Also can you meet/talk to any existing franchisees?
- How much capital does the franchising company have behind it, how profitable is the franchising company at present and can you see any audited accounts?