5 Tips for franchise evaluation checklist

Are you thinking about stepping into the lucrative world of franchising? Do you feel that owning a franchise will help you scale your business towards success? Research and review these 5 tips to help you evaluate franchise opportunities before you commit to any franchising business.

1.Find a franchise that fits you

Owning a franchise is a long-term commitment. Hence ask yourself what interests you, what you are good at, your goals, your prior experience? How much time can you commit? Are you comfortable managing employees?  Is owning and operating the franchise going to give you the lifestyle you want?  Imagine what a regular day operating this business will look like.

2.Research about franchisors

Obtain direct information or research online. What is their reputation? Do they have any lawsuits or disputes? If the franchisor is publicly held, annual financial statements are published by the Securities and Exchange Commission. The more information you have, the easier it will be to pick the right franchisor for you. You can also write down a list of questions for your franchisor before you decide to buy.

3.Find a franchise that suits your budget

Franchisors usually disclose their financial requirements to potential investors. However, start-up payments required can vary significantly from franchise to franchise.

Similar Read: 3 Tips before you franchise in an inexperienced sector

4.Obtain franchisee feedback

Talk to the existing franchisee and get their feedback on the support they are receiving from the franchisor. Do they have sufficient training and marketing assistance from the franchisor? Will they be willing to franchise again with the same franchisor?

5.Examine the Uniform Franchise Offering Circular (UFOC)

Many franchisors are reluctant to share this document until the interested investor has applied for the franchise, had his or her background and finances investigated, and interviewed with the franchisor. The UFOC contains a wealth of information that allows potential franchisees and their CPAs or attorneys to evaluate the franchise.  It includes information about audited financial statements, franchise fees and start-up payments required, information regarding any litigation involving the franchisor, required franchise agreement, and any other contracts the franchisee has to sign.  It also includes the franchisor’s claims regarding the earnings of its franchises.  Make sure you receive enough information to evaluate earnings.  Ask for information on the results of franchises in the same geographical area.  If the franchisor is reluctant to provide the information needed for a good evaluation, it’s a red flag.  Federal law requires that franchisors allow at least 10 days for the potential franchisee to review the UFOC.

Similar Read: 6 Tips to Evaluate a Franchise Opportunity

Source: Allenandcompany

To get to know who are the industry key players, visit our Interview of the Week page.

To stay updated, visit our Franchise News section.

To learn more, visit our Franchising Tips section.

Leave a Comment

Your email address will not be published. Required fields are marked *