What You Need To Know Before Buying A Franchise

Any business franchise opportunities may seem to exciting when you first see it especially in franchise expos where franchisors need to make their business look very nice. Upon seeing how their business looks like, our emotions get high and we get excited to acquire one. However, we shouldn’t be rushing when it comes to business. Take time to know everything about the business you’re about to get in to. Rather than regretting in the end, study everything about the business you want to purchase.

Questions to ask to the franchisor directly are:

1. How long have you been in this business?
2. How long have you made your business available for franchising?
3. How many franchise stores do you have? How many of them are owned by the original franchiser?
4. Can I buy an existing corporate-owned store instead of building one from scratch?
5. Can your business be duplicated including quality and service?
6. How much is the initial franchise fee and what does it include?
7. Is the franchise brand name registered with the Intellectually Property Office of the Dept. of Trade and Industry?
8. Does the franchise have a logo a brand name, and logo-text?
9. What are the control systems that the franchise has in place? (such as a central commissary, secret ingredients and operation manual, accounting systems, etc)
10. What kind of pre-opening support do I get?
11. When the business is operating, what kind of support do I get on a continuing basis?
12. Can I spend a week observing an actual franchise operating?
13. Do I have exclusive territorial rights?
14. How much do I have to spend for my store’s construction and initial inventory?
15. Where do I buy succeeding inventory supplies?
16. Would succeeding inventory supplies be delivered? How much would it cost?
17. Do I have to buy my inventory exclusively from you (the franchiser) or can I procure them elsewhere?
18. Can I return merchandize (inventory) for credit?
19. How much do I have to pay you in royalties when my franchise is already operational?
20. Is the royalty fee based on my store’s gross sales or based on my purchases from the franchiser?
21. How much are you going to charge for joint advertising fees? What kind of advertising and marketing programs do you have?
22. In your corporate stores, how much are you making per store? Can I see your financial statements for that store’s operations?
23. Give me a list of your other franchise holders whom I can talk with about the business.
24. Has any of your franchise holders defaulted or closed shop? Who are they (names and phone numbers) and what were their reasons for their defaulting or closing?
25. Can I have a copy of your franchise agreement for my review?
26. By how much can I deviate from the franchise agreement concerning products I can sell in my store?
27. How long is the duration of franchise agreement? Is it renewable and what are the renewal rates?
28. Are there penalties if I withdraw earlier from the franchise?
29. If I decide to buy another franchise from you, do I get a discount?
30. If I recommend another franchise holder, do I get a referral fee?
31. Can I change the location of my franchise store (at my cost) if the present one is not viable? Are there any additional fees to pay for the change in location?

Once this checklist is accomplished, weigh the pros and cons. Think of what you can do to compliment the cons and how you could flourish with the pros. Sometimes a business is too good but you may not be ready for it. If you can’t see yourself doing the business with the information you gathered, it would be best to look for something else.

Franchises are presented the best way you can imagine to entice entrepreneurs to buy their business as soon as possible. It would be wise to let the emotions subside and study the business before you decide. Good luck with your venture!- DE