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Measure Twice Cut Once – Franchise Buying Checklist – Personal Items to Consider

You cannot over prepare when deciding on whether or not to invest in a franchise. It is a major, time-consuming investment. And a franchise involves considerable financial risk. When selecting a franchise, you must examine a multitude of financial and nonfinancial factors. Here are some considerations to evaluate before purchasing a franchise:

• Competition From Corporations, Other Franchises And Local Small Businesses: What is the level of competition, in your community, in your region and nationally (do you really need a seventh coffee shop in a two-block area)? How many franchised and company-owned outlets does the franchisor have in your area (will a later franchisee build across the street from you)? How many different companies sell the same or similar products or services (sandwich shops)? Do you offer the same goods and services at a better value or lower price?
• Is Your Business Economy Dependent? Many restaurants and health clubs have experienced dramatic drops in their customer base due to a soft economy.
• Why Do You Want a Franchise? Make a list of the reasons you desire a franchise and determine how many are really valid and have merit. Questions could include:
  • Are you seeking financial independence?
  • Do you need a specific annual income?
  • Are you interested in pursuing a particular field of interest?
  • Are you truly interested in retail sales or performing a service?
  • How many hours per day or week can you work? How many are you really willing to work?
  • Do you intend to operate the business yourself or hire a manager? Can you afford a manager?
  • Will franchise ownership be your sole source of income or a supplement to your current income?
• Is There An Established Franchise Name Recognition Factor? If your franchise is little known, you will have a harder time penetrating the market with brand awareness. A primary reason for purchasing a franchise is the right to use the franchisor’s company identity. Some simple questions to ask include: Is it a registered trademark? How long the franchisor has been in business? What is the franchise reputation? What is the consumer perception of the business?
  What Are The Franchise Training And Administrative Support Services? A major consideration when purchasing a franchise is to obtain quality support from the franchisor. Examine the training available to you and ask other franchisees for their experiences.
  Is the Franchisor Experienced? Many franchisors start out as their own company then expand into franchising due to demand. Other franchises start with the intention to grow as rapidly as possible. Determine how the growth of the franchise system will impact you. Also, evaluate if the franchisor has sufficient financial assets and staff to support your franchise.
• Are You Experienced? No, that is not a line from a Jimi Hendrix album, it is a cold, hard assessment of your talents. The franchise has to perform, but you have to perform as well. Will you work the extra hours and have the extra monies needed to succeed. Could you conduct the business by yourself if you must trim staff cut costs?
• Is There a Demand For The Product Or Service? First things first, ask yourself if there a demand for the franchisor’s products or services in your community? And even if there is a demand, can your franchise fill that void. Determine if your franchise has seasonal (ice cream or firewood)? Determine if there likely to be a continuing demand for the products or services in the future (think 8-track tapes and floppy disk drives)?
• Got Dough? Even if you are not starting a bakery, you need dough and lots of it. Ask yourself the following questions about your franchise Investment:
  • How much money can I invest and be able to sleep at night?
  • How much money can you afford to lose if the franchise doesn’t work out?
  • Do you need or want business or financial partners?
  • Where will the franchise financing come from and is it enough for tough times?
  • What is your credit rating and how will that impact financing?
  • Do you have adequate savings or additional income to live on while you start your franchise?
  • If your franchise has a period of no income, can you survive? For how long?