How to select a franchise

Research, compare, decide

The research process into the franchising business model is ongoing and usually starts long before an expo. Entrepreneurs have to do their homework beforehand, by conducting research on the types of franchises that best suits their investment limitations, goals and background experience, which is already a hefty amount of information to digest.

Franchisees should be aware that exhibitors would often pressurise attendees at exhibitions through sales talk, as their primary goal is to convince the entrepreneur to buy into their concept. However, it is important not to feel pressured to make any rash decisions and commitments. Legitimate franchisors expect you to make comparisons and to investigate their offering before making any decisions, especially considering as they too need to be sure that you are serious about their brand.

Entrepreneurs who might not have had the opportunity to ask their important questions should contact the new business development manager at the franchise, as this person is usually the first point of contact when an entrepreneur is serious about a franchise.

The person involved in recruitment will be able to share all the information required on the workings of the franchise, as well as the success it has achieved to date and guide the entrepreneur to make an enlightened decision.

Finding business fit

Franchisees first need to determine how much they are able and willing to invest in the chosen franchising industry and ensure that the franchise they are considering is a good business fit. Consider the following questions:

• How long has the franchisor been in business?
  
• How many franchise outlets currently exist?
  
• Where are they located?
  
• How much is the initial franchise fee and any additional start-up costs?
  
• Are there any continuing royalty payments? If so, how much are these payments?
  
• What management, technical, and ongoing assistance does the franchisor offer?
  
• What controls does the franchisor impose?
  
• What is included in the set-up costs?
  
• How much royalty fees need to be paid?
  
• Is there a marketing budget?
  
• Is there adequate demand for the product?
  
• Which areas are available to conduct business in?
  
• What are their company values?
  
• What are their goals and ambitions?
  
• What happens in cases of conflict?

Once the above questions have been successfully answered, and the franchisee is content, prospective franchisees should speak to existing franchisees in the franchise group and ask them to offer their input and share their thoughts on the support and profits they are receiving.

Get legal advice

Franchisees should not sign any contract or make any payment until they have the opportunity to investigate the franchisor's offering thoroughly. The franchisor should provide the interested party with a disclosure document containing important information about the franchise system with as much detail as possible.

The franchisee should gain legal advice before entering into any contract or agreement. When the time comes to sign the agreement, it is beneficial to obtain the aid of a qualified franchise attorney, as certain items in a franchise agreement may be negotiable. This agreement needs to be evaluated and discussed, in order to identify potential changes that could occur.

Buying into a franchise entails a significant investment and it is imperative that franchisees seek all the needed guidance from professionals in the industry to make informed decisions.