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Investigating a Franchise

Buying a franchise does not remove the risk of failure and thoroughly researching and evaluating a franchise before you buy it can play a huge role in determining its success.

The first step would be to determine the different types of franchises available and this can be done by:

  • Reading franchise directories
  • Reading articles and ads in franchise business publications
  • Attending franchise exhibitions and tradeshows
  • Researching on the internet

Once franchises have been shortlisted you need to evaluate the strength of the franchisors. You can go about this by:

  • Evaluating the history of the franchisor
  • Seeking professional legal advice regarding the franchise disclosure document and franchise agreement
  • Interacting with existing franchise owners
Investigating a Franchise

Key Criteria for Selecting a Franchise

While deciding on which franchise to purchase there are a number of factors to take into consideration including:

Costs
  • How much will you have to spend before you being to see profits from a particular franchise?
  • Do you have the necessary finances to purchase this franchise?
  • Will the profits it generates be worth the time and effort?
Your skills and talents
  • Do you possess the requisite skills to develop the franchise successfully?
  • Are your business skills developed enough to manage the franchise?
Product/service demand
  • Does the franchisor’s product/service have enough demand in the prospective area of operation?
  • Is the demand consistent or seasonal?
  • Is there scope for growth in demand in the future?
  • Will the product/service have repeat customers?
Competition
  • How many competitors operate in the prospective area including other franchise owners?
  • How established is the competition?
  • Is there any variance in the competition’s offerings?
  • Are there any niches in the market that you can capture?
Brand name
  • How well known is the franchisors brand?
  • Do they enjoy a reputation of providing a quality product/service?
  • Is there a lot of negative comments and complaints against them both online and offline?
Training & Support
  • What is the level of training and support that the franchisor provides?
  • Have the existing franchise owners found the level of support and training satisfactory?
Franchisor Experience
  • Has the franchisor’s business existed long enough to have established the level of business strength that you are seeking?
Expansion Plans
  • What are the expansion plans of the franchisor and do you find them to be feasible?

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