Before You Buy Any Franchise - Read This

Always exercise care when checking out a franchise.

Large franchise businesses such as Wendy's, McDonald's and KFC are always popular with many (but not all) of them "booming".

The people setting up franchise ideas and businesses know a good thing, and are really promoting the idea. Franchises for just about every conceivable kind of business are being sold in ever increasing numbers around the world.

Some franchises are very good. They treat both the franchisor and the franchisee very well. Others however are very one-sided. Still others are almost total rip-offs that trap unsuspecting investors into paying 10 to 20 times the actual value of the business idea, equipment, or whatever it is they are trying to get new owners to buy.

Before putting money into a franchise, make sure you fully investigate everything.

Here is a list of questions you need to ask and receive satisfactory answers to before investing.

  1. Lawyer - Has your lawyer studied the franchise agreement, discussed it completely with you, and do you both approve of it without reservations?

  2. Legal - Does the franchise require you to take any steps which are either illegal or even border on illegal, or are otherwise questionable or unwise in your country, city or country?

  3. Exclusive - Does the franchise give you an exclusive territory for the length of the franchise period, or can the franchisor sell a second franchise in your territory?

  4. Connections - Is the franchisor connected in any way with any other franchise company handling similar products or services?

  5. Protection - If you answered yes to the above questions, what is your protection against the second franchising company?

  6. Termination - Under what circumstances can you end the franchise agreement, and at what cost to you?

  7. Sale - If you sell your franchise, will you be compensated for your goodwill or will it be lost to you?

  8. Proven - How many years has the firm offering you the franchise been in operation?

  9. Reputation - Does the company offering you the franchise have a reputation for honesty and fair dealing among its franchisees?

  10. Current franchisees - Has the franchisor shown any certified figures indicating exact net profits of one or more of its current members, and have you personally checked the figures with these people?

  11. Assistance - Will the franchisor assist you with:

    • A management training program;
    • An employee training program;
    • A public relations and advertising program;
    • Capital;
    • Credit;
    • Merchandising ideas?

  12. Location - If needed, will the franchisor assist you in finding a suitable location?

  13. Capitalised - Is the franchising firm adequately financed so that it can carry out its stated plans?

  14. Management Support - Does the franchisor have experienced management, trained in depth so you have support?

  15. Unique - Exactly what can the franchisor do for you that you cannot do for yourself?


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