Q: What should I look for when choosing a franchise?
Sep 24 2008
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There are a few basic principles when looking at a franchise:
1) Be sceptical about franchises, franchisors and franchise specialists
2) Make sure you have independent advisers i.e. not those chosen by the franchisor. The most unbiased adviser is likely to be a high street bank
3) Be wary if the franchise you are interested in is the first to be sold. You will need to study the pilot operation carefully. Does it mirror your likely business? Does the manager of the pilot have the same sort of knowledge and skills as you? Are the premises and location similar? Is the stock identical?
4) Watch out if the initial fee is relatively large and the continuing fee relatively small. It is essential for the franchisor that the business continues to be promoted and properly managed. The success of your business depends on how effective the franchisor is in marketing and purchasing.
5) Check arrangements for purchasing equipment and stock. You don't want to be forced to buy new equipment for the sake of it; nor do you want an arrangement in which the franchisor can increase the mark-up on products sold to you. Look for alternative sources.
6) Investigate the franchisor. The continued existence of the franchisor's business is important to you because it carries out the marketing, purchasing and other centrally organised functions. Get references and credit ratings. Ask the franchisor to give you a copy of the latest accounts and ask your accountant to study them.
7) Ask questions if you are buying a franchise from a franchisor who is not a member of the British Franchise Association. Membership does not guarantee the success of your business or the franchisor's business. And a number of quite reputable franchisors do not belong to the association. However, members do agree to abide by a code of ethics.
8) Check that the product has been patented or the name registered as a trademark, otherwise the franchise you buy could be worthless.
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