Using the FANZ for protection

Checking the Products or Services
This is most important because if the products or services have little record of past success or it appears that the market demand may be small then you may have to look for another business opportunity.

Some of the things that you need to ask will include the following:

  • How would you rate the product or service if you were buying it

  • Is it poor quality or is it so specialised that only a certain type of person would be interested

  • Do you get a specific exclusive territory within which you can sell the product or service? If is this is the case, you will need to conduct marketing in that particular area.

  • Check what the competition is for these products or services. Also look at the industry trends and see if the market is expanding or diminishing.

  • A lot of information about the products or services can be obtained by talking to customers or by talking confidentially to competitors.

Checking the Financial Costs
You need to ask yourself:

  • How much money do I need to get together to start up this business?

  • How much money will I need for the operations over the next 6 months, until the franchise starts to run profitably?

  • How much money will I need to pay for the upfront franchise fee and what costs are involved in the royalties?

  • Will the franchisor provide financing or will he assist me to arrange financing through other lending institutions?

  • Is the franchise fee only a deposit and if I don't go ahead is that fully refundable?

  • What is the expected timeline between the signing of the franchise agreement and the opening of the outlet ready to earn revenue?

  • What is the annual profit projection for the particular outlet that you are going to buy?

  • What systems and accounting practises run by the company and are they sound or can they give a wrong picture of the franchise?

  • Are there any training costs involved and who meets those?

  • What promotion and advertising costs do I have to pay when I take this on?

  • What wage figures have they put into the projections and does it allow for employees to be brought in or am I and my family expected to work the whole business at low rates of remuneration?

  • If you are taking over an existing franchise you will need to look at the value of stock, value of assets, what debtors are on the books, what creditors are due to be paid, what staff entitlements are still due and check their rate of pay.

  • What are the debts of the business and who looks after the payment of those debts?