Do Business Well

Take great care before investing in a franchise. Under no circumstance should you be rushed into taking up a franchise. This is your life we’retalking about here.

Firstly, you must evaluate your own skills, aptitude and abilities.

Based on the pros and cons of being a franchisee outlined in the previous section, decide whether you will be a good franchisee. Taking up a franchise will impose substantial burdens on both you and your family. You will be required to invest large sums of your time and money (or even borrowed money) in the franchise.

Secondly, establish the areas of business activities that you are interested in. Obtain lists of available franchisees.

Thirdly, obtain details of those franchisors that are in your area of interest. Compare their terms, track records, reputation and size. Narrow your choice down to three or four.

Fourthly, really do your homework on your short list. The types of questions you should ask your potential franchisor include: -

• Is there a demand in the market for the products / services? The market demand must be sizeable, sustainable and substantiated with legitimate sales and marketing statistics.
• Has the product / service got staying power? A fad cannot be franchised, since it doesn’t have long term potential.
• What is the track record of the franchisor? If franchisees are selling out at an alarming rate, or if your bank is not impressed when mentioning the franchisor’s name, you should be cautious. A good franchisor has excellent references, happy franchisees and a good reputation in its specific industry
• How many franchisors are in existence in this industry and what profits are they making? Make sure that your franchisor of choice is measuring up to industry standards and benchmarks.
• Does the franchisor have a solid, experienced management team? Support is vital to a franchisee and should be provided by competent, knowledgeable support staff.
• Who is the competition and how strong are they? Make sure that your prospective franchisor has a sizeable slice of the cake.
• Speak to potential banks and see if the banks approve the franchisor. If they don’t, chances are that you will have difficultyin obtaining financing.
• Ask for and ensure you obtain an updated “disclosure document”which will give you full details about the franchisor concept and itsdirectors. All F.A.S.A. members are required to provide potentialfranchisees with a disclosure document.
• Go and visit a selection of franchisees and establish if they are happy with their investment.
• How efficiently did they handle your enquiry about a franchise? Ifyou experienced unexplained delays or any confusion at headoffice level, chances are that you are not dealing with a competentorganization. Things could only get worse.
• Is the franchisor choosy about the sort of people it accepts as franchisees? This is important, since the calibre of franchisees within the group will determine the reputation and ultimately, the performance of the franchise.
• Finally, is the franchisor prepared to show you the financial results of his company owned pilot stores? Are these storesperforming well?

You should not be embarrassed about asking these questions. You and your family’s future is at stake. So if a prospective franchisor makes you feel uncomfortable, or indicates that he is in a position to sell the franchise to persons less difficult than you, steer clear. There are many other great opportunities out there.

Finally, franchisors normally fall into one of the followingcategories:

1. Excellent and established professional franchisor.
2. Franchisor of a promising but unproven concept.
3. Rip off artist doomed for failure clue to lack of experience and untried concept.

It is essential that you avoid the third category. You should notnecessarily be daunted by category two; provided that you are aware that you are taking on a speculative venture and that the risk is high. We would not recommend the second category until the concept has been piloted for at least one year.

Possibly related posts: (automatically generated)
Investing in a franchise: Take it slow

• Mutual Funds Explained Pretty Clearly
• Selling the Franchise
• The return you expecting on your investment
• Financial Time for Small
• Some Franchise Terminology
• GlowGetters Offer Ongoing Business Support
• Modern-day Franchising Part 2
• Relationship Franchise Agreement - Operations Manual
• Teenage Investment Strategy
• Ask Yourself: Would You Invest?

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