Ten Questions to Ask Before Buying a Franchise

(FranBest.Com)

You’ve got to be very careful if you don’t know where you’re going, or else you might not get there. - Yogi Berra

Related reading: 10 Criteria for Choosing a Franchise

Ten Questions to Ask Before Buying a Franchise by Sean Kelly, President, IdeaFarm

The probing question is the most important research tool in finding the perfect franchise opportunity for you. Here are ten questions to ask when considering any franchise opportunity:

1. What’s my motivation for owning a business?
Why do you want to own a business? What elements are important to you? What are your goals? Write them down and ask yourself if this given opportunity will get you there. While there are certainly both good and bad franchise opportunities, it is also important that you find the franchise opportunity that best meets your immediate and ongoing needs.

2. How does the franchised business concept work?
Who are its customers? How does it attract them? What’s the product line? How does it compare to its competition? Can it be easily copied? Is it the operation itself designed from both the customer’s and the operator’s viewpoint? Is it efficient? Is the product line sufficiently appealing in good economic times and bad? How is profit generated?

3. What’s the market for the franchises products and services?
What is the demand for the franchise business? What is the size of the market? Is its growth dramatic, flat or declining? What changes are taking place in the industry? Is the franchise concept well-positioned to benefit from social or industry trends? Is it positioned not only to meet the needs of today’s consumer, but tomorrow’s consumer as well? What is the demand in your intended geographical area? How many new competitors will the market support?

4. Has this company and concept stood the test of time?
How did the business start? Evolve? When was the company and concept founded? How has it changed? Did it thrive through a variety of economic times? Has it built a strong reputation and a loyal customer base? Does management show a commitment and/or talent for fine-tuning and improving the concept? For adapting to changes in the marketplace? Remember, a lot can happen over the course of your franchise contract

5. What’s the depth of experience of the franchise team?
You are paying for guidance, know-how and experience. Be sure its worth it. What is the company’s experience, both individually and collectively? Do they have resources that you will continue to benefit from? Who will provide your support? Do you respect their knowledge? Are you comfortable working with them? Do you get the sense that they truly have your best interest in mind?

6. How will the franchise company help me get started?
What initial services & training does the company provide? Do they help you find or select a location? Do they provide thorough training, both in the classroom and in the field? Do they provide design assistance, blueprints, equipment sourcing, etc. Getting up and running can be stressful. A good franchisor will provide strong assistance in this area, and have a well organized, well articulated start-up program.

IMPORTANT: Beware of any franchise that will not refund your franchise fee or downpayment if you fail to find a location within a specified time. This had been the subject of numerous recent lawsuits.

7. Will I derive ongoing benefits from the franchise relationship?
In short: will you continue to derive benefit from this relationship after you’re up and running? Are there proprietary products or processes you will continue to benefit from? How extensive is the field support? Will you get visits from company representatives at your location? How often? Will they provide refresher or ongoing training programs for you and your staff? What marketing programs and assistance will you receive? Will you benefit from their buying programs and vendor relationships?

8. Am I qualified to run this franchise?
How does the company describe their profile franchisee? Are you a match? Do you have the experience and/or the professional skills they say are necessary? Do you meet or exceed their stated financial requirements? Are you looking to locate in an area that is logical for the expansion of their brand? It is important that you are realistic about your ability to finance and support your chosen franchise, even if you get off to a slow start.

9. Is the franchisor selective about which franchisees they accept?
All franchisors SAY they are selective. All say they “award” rather than “sell” franchises. the good ones actually do. What are the steps you must follow to become a franchise owner? The franchise selection process should not be sales pitch, but rather a series of informational exchanges that help both sides determine whether the franchise is a good fit for you, and vice versa. Make sure the quality of franchisees is high, as the image they put forth will reflect on you

10. Does this franchisor have a great reputation?
What do their franchisees have to say about the company? Current franchise owners are a primary source of good information. What do their vendors say about them? How enthusiastic and loyal is their customer base? Have they been able to build and sustain a strong brand reputation on both the corporate and consumer levels? Be sure this is a company that you’ll be proud to be associated with.

Franchising is a great way to go into business, but only if you do so with your eyes wide open. Before you start any business, understand that if you plan to take the credit for success, you must also be prepared to accept responsibility for failure. The best way to ensure the former and avoid the latter is to ask lots and lots of questions upfront.

Best of luck!

copyright 2007, FranBest

This Tuesday’s Tip is sponsored FranchisePick.Com, the website for helping you pick the perfect franchise.

You could sponsor Tuesday’s Tips. Inquire to info[at]ideafarm.net

10 Tips for Investing in a Franchise

10 tips for investing in a franchise

By Joel Libava

With 3,000+ different options in the world of franchising, the following tips are a good starting point for those starting the process. Remember, knowledge is power!

1. Start your exploratory process by looking at what your business skills are. Are you great at sales and marketing, or operations? Are you a manager of people, or would you prefer having no employees?

2. Are you comfortable using someone else’s systems and procedures? Remember that franchising is a license that you purchase to have the right to use the system. Don’t invest in a franchise, if you won’t use the system. Start an independent business instead.

3. Do you have family support? Starting any business is a family decision. Family members must understand that there will be demands on your time, and that they will need to be supportive of your decision.

4. Do a net worth statement. Subtract all your liabilities from your assets. The difference is your net worth. In addition to the down payment required by lenders, do not forget about your living expenses during the start up period. You should have funds set aside for 6-12 months, while your business ramps up.

5. When you find some franchises that interest you, visit and talk to as many franchise owners as possible in those systems. Are you like them? Are they happy with their decision? Would they do it again?

6. Don’t rush the research process. Be thorough, and talk to both happy and UNHAPPY franchise owners. Be willing to discuss what you are hearing with the franchise company’s representative. See how they react to your questions.

7. Read through the Uniform Franchise Offering Circular {UFOC}. This is the required legal document that will be sent to you by the franchise company. Write questions down as you go, and be prepared to ask them to the franchise company representative.

8. When you have narrowed your search down to one opportunity, visit the franchise company’s headquarters. Meet the executive and support teams in person. These are your business partners.

A good franchise company is also checking you out. They want the right people for their franchise.

9. When you get back from your visit, go back through your notes, and see if you have missed something. If not, now is the time to have an attorney familiar with franchise law look over the franchise documents. The attorney should point out things you may have missed, and explain both party’s legal obligations. You should also have a CPA help you decide on a business structure for your company, if you decide to move forward, and go over financial information.

10. Gut check time. You have done the data collecting. You have met franchise owners. You have visited company headquarters. Does the opportunity “feel” right? If so, move forward. If it does not feel right, don’t do it. There will be other opportunities. Really.

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ABOUT THE AUTHOR: Joel Libava, Franchise Selection Specialists Inc. 2^nd generation President, brings real world franchise industry experience to his clients, coming from a franchise management background in the automobile and restaurant/hospitality industries.

Website www.Statefranchisecenters.com

Blog http://www.Thefranchiseking.com

© Copyright Joel Libava. Used by Permission.

Contact Joel at franpro@sbcglobal.net or by calling 216-831-2610

Top 5 Franchisor Internet Marketing Mistakes: #1

CLICK HERE for “Justin Queen: Franchisors under-deliver on their franchise website” on Franchisor Marketing. 

Internet marketing plays a critical role in effective franchise marketing and franchisee recruitment.  As critical as it is, franchisors have traditionally been slow to adopt new technologies.  That’s created opportunities for franchise companies who can adopt New Media strategies for spreading awareness of their franchise program, generating inquiries, and turning those inquiries into leads and, eventually, sales.

To help franchisors identify areas where they can boost their effectiveness on the Internet, Franchisor Marketing asked Justin Queen, founder of BluZeus Technologies, for the Top 5 Mistakes Franchisors Make with Internet Marketing… And what they can do about it.

An Interview with new Rita’s Franchise Owner Jane Hollinger

Jane and Ed Hollinger are the owners of the SunDance Car Wash chain based in Lancaster County, Pennsylvania. These twenty-year business owners opened their first franchise, a Rita’s Water Ice, in New Holland, PA during the early summer of 2006.

What made you consider starting a business and becoming a franchisee?
The opportunity to start a new business arose when property next to our car wash became available. We wanted to start something different that New Holland did not have, but we didn’t want to start from scratch, either. We also wanted something that our sons could help manage later on.

How did you find out about Rita’s Water Ice?
Rita’s came into our area about four years ago, which is when we first became aware of the franchise. My husband Ed and I are regular Rita’s customers, and our three boys love going to Rita’s with their friends. Every part of Rita’s is a refreshing treat. The flavor of the ice is pleasant and the atmosphere is fun.

What steps did you take when you were considering Rita’s?
We contacted Kurt Stumf, a Rita’s franchisee that we are friends with, to gain his advice and input. We know Kurt because he also owns a carwash business. After talking with Kurt, we devoted a weekend to go visit other Rita’s locations throughout Pennsylvania, New Jersey, and Maryland. That gave us the opportunity to meet Rita’s franchisees, ask questions, and to physically observe the stores themselves. We wanted to hear the experiences of other franchises firsthand, in addition to meeting with the Rita’s franchisors in Bensalem.

What factors were important to you that led you to open a new Rita’s location?
I love the product, which is what sold me in the end. But it also seemed like we would have someone to work with us during start up and once we were on our feet. They offer different departments to source supplies and equipment, which really appealed to me. When I dealt with the people at Rita’s, they always offered their assistance and that made us feel cared for as franchisees. Once we got started, Rita’s sent a trainer to work alongside us in the store during the first week of operation. Their support is part of the package and that was very valuable to me.

What is it that you wish to accomplish? What are some of your long-term goals?
If all continues to go well, we wouldn’t mind owning another Rita’s Ice location someday. One of our sons, Kevin, has a real interest in business management, and he is going to start taking college business courses this fall. The goal is to help him get our Rita’s going and walk away. Then we will just oversee when needed. It is an awesome legacy to hand down something like this to your kids. It helps them to provide for their future and to develop a good work ethic.

Franchisees Talk Business Strategy

In searching for the right franchise, the best way to discover what it is like to be a franchisee is to go to the source. Here are some helpful tips to consider when looking at a new franchise opportunity. Click here to read the story.

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