10 Key Factors In Selecting A Franchise

Before buying a franchise business there are a lot of things to consider. This article states that 10 factors you should look for a franchise business that will help you avoid some major pitfalls.

The article also referred to as a RIYOT avoid the acronym means repent RIYOT IN YOUR OWN TIME. The point being that if you pick the wrong franchise hurry could be regretting the decision for a long time. We hope that by reading this article can be stopped at least a few people making a very costly error trial. We hope you find useful.

This list has been compiled by a very experienced franchisee. All information here is based on direct experience, and near misses we have heard the stories of the “trenches.”

- How to franchise your business will be affected by economic cycles? (eg, for example, during a general economic recession or worse in the long term).

All economies are cyclical and as you know from experience there are times of prosperity (which can last for many years) and there are times when the global, national and local economic slowdown means (which may last for many years).
What impact will the change in the economy have on their future business? Normally, luxury products and services, non-essential services and goods will suffer more than those considered as cost savings or goods or services.

- How dependent is the franchise in the area / socioeconomic mix?

Most franchises start from a single business in a single area. The initial success of this operation and perhaps a subsequent pilot are often the basis for the entire franchise operation. However, the area started in the business and the area you operate in the franchise is likely to be different (different mix of homes to businesses, from blue collar to white collar workers, high income to low income, different levels of competition, etc..) Assess the impact of these differences in potential.

- Does the franchise operation as a whole to survive if there is a change of ownership or change of management?

Some franchise operations will be successful only due to the influence of the founder or current owners or management team. What would the impact of a change in the owner, manager of the company? Do you think the product and operating model that works equally well regardless of who owned / operated franchise group? A change of management may have the effect of turning a well-run in a bit of management.

- Does the franchisor have the right management structure in place to be proactive in developing the company?

New ideas and approaches to business are an essential and necessary function of franchisors competition in the long term survival of the franchise. Ask about their experiences and how they intend to remain competitive in the long run? What ideas have product / service growth? What you have flexibility as a franchisee to change the product mix, marketing or pricing strategies?

- The profit margins must be high and above normal levels if you are able to pay franchise fees as well as yourself.

In revising the financial forecasts for the company needs to establish the net benefit after any franchise fees are paid. They often cite the numbers look great, but do not include franchise fees are paid monthly. Depending on the franchise which may include both fixed amounts based on rates and the percentage of turnover.

- The products or services available from the franchisor must have some element of uniqueness to them that is unique to the franchisor, and preferably patented.

If the franchisor does not offer a single product or service, then it is very likely already have or will soon receive direct competition from other franchisees, independent retailers and chain stores. Open a franchise of the magazine and you’ll see that many industries and many business franchise (such lawncare, property rental, food, etc.) and they offer very similar products or services. This factor when considering the income levels cited by the franchisor, if a competitor opens next week will be reduced to half their income potential?

- Supermarkets are a great idea for most of us but do not want to be in competition against them.

Supermarkets and large chain stores to reach niche markets and that have a high degree of profitability and / or build your customer number (eg, photo processing, dry cleaning, newspapers, books, DVDs, etc.). If There are enough supermarkets will benefit any business opportunity, and often have the resources to enter the market. Many small businesses have closed due to the power of supermarkets. Could this happen to your franchise?

- A good franchisor will allow you to talk to any of the franchise that has launched.

A good franchisor will give you a list of all franchises currently operating and to choose the people who want to talk. Due to the pressures of running a business, not all franchisees are willing to see all the potential new franchisees. Take this into account, but try to talk to as many as possible ideally 5 or 6.

- Pilots and fully audited to franchise the best chance of success.

Can help mitigate the risks of buying and operating a franchise looking BFA accredited franchises. For more details on the membership, please see the BFA website (. However, this does not guarantee success and the lowest franchises can work very well. In addition, a more established franchise is more of a premium who will pay for it.

- A good franchisor will encourage you to visit its headquarters, which will encourage you to work with them for a day and give all information requested and not disturb that decision.

Ideally, however your franchisor will be a step further. If you really want that success to carefully examine their suitability as a franchisee (not just control who has the money!). We suggest you take a credit agency to see the Directors / Franchisor / key financial personnel.