10 Important Things To Consider When Buying A Franchise

1 – How much capital is required?

The purchase price of a franchise can vary widely, but also make sure you are clear on whether this figure also covers other capital expenses, such as real estate, vehicle purchase and shop fit-out. Sometimes the initial fee only covers buying the right to trade under the brand – with everything else an added cost.

2 – What are the financing options?

Many banks offer attractive franchise lending packages worth up to 70% or more of the franchise cost, easing pressure to finance against home equity and other personal assets. However, you should make sure you closely evaluate all options as the wrong decision could cost you dearly.

3 – Is there market demand?

Is there strong consumer demand for the franchise product or service, and is that demand set to continue? As part of this, you should also evaluate competitors, and measure the quality of their product against that of the franchise you are interested in.

4 – What’s the franchise’s track record?

A little digging online can tell you a lot about the franchise’s reputation and business record. It can also reveal whether there are any past or present legal judgments against them. Also, speak with an existing franchisee if possible.

5 – What legal agreements are required?

Before you sign on the dotted line, make sure you’ve run the agreement by a legal professional with franchise experience. And you shouldn’t feel pressured to sign – if that’s the case, you should probably walk the other way.

6 – Does the franchisor have a good marketing program?

See if you can take a close look at the methods the franchisor uses to research new and existing markets. As a franchisee, will you be privy to marketing information, and get training that is specific both to the industry and your business.

7 – What support do they offer beyond initial training?

A good franchisor won’t abandon you after the initial week of orientation. They should be genuinely interested in your ongoing success, and help you develop a business plan.

8 – What is their selection criteria?

Do they have a selection criteria, and how stringent are they really? What are the education and/or training requirements, and is there an “ideal” franchisee they have in mind?

9 – What’s the success rate?

In other words, how many of the franchisees are still in business – and importantly, still happy – after the first two years?

10 – How are conflicts resolved?

If a procedure or policy rubs you the wrong way, what guidelines and mediation processes do they have? Is there any room for original ideas or innovation?