Checklist for Comparison Shopping
by Suzanne Kauss Jensen
According to the U.S. Department of Commerce, buying a franchise is the average persons most viable avenue to owning a business. Before you make your investment, be absolutely certain that the organization is capable of delivering the support that will insure profitability for your franchise. If you are serious about investing in a franchise, shop around and compare the merits of one franchise against another. When doing so, make sure that the following questions get answered to your satisfaction.
______1. Do the officers and directors of the franchisor demonstrate a high degree of business and franchising experience? If the master franchisor is inexperienced, it is using its service fee dollars literally to learn a business, a lesson that is unfair to the franchisee and could certainly render the franchisor insolvent or make it necessary to recapitalize, thereby risking the investment of the franchisee.
______2. Is the franchisor totally centralized or structured so as to be able to provide local support? A regional type structure allows the individual franchise owners to get more personalized attention, which, in turn, allows them to grow their franchises more efficiently and profitably. Hands-on training and agency evaluation visits should be readily available.
______3. Did the representative of the franchisor state a requirement to meet with existing franchise owners or avoid that issue? When you are looking over a franchise organization, being able to talk to people who are already working within the existing system gives you the opportunity to find out how the system works in reality. Most importantly, let your representative take you to franchise owners who are properly implementing the program so that you can be the judge of how doing it right translates into your bottom line.
______4. Does the representative of the franchisor exhibit a high degree of sales professionalism? While the representative deals with you, he IS the organization. His professionalism--or lack of it--mirrors that of the organization. Examine closely how the representative makes his presentation and what types of materials he presents to you.
______5. Does the franchisor closely question the qualifications and suitability of prospective franchise owners? The master franchisor owes it to the other franchise owners in the system to accept only the most highly qualified applicants. Just accepting anyone may swell the numbers, but ultimately the professional reputation of the franchise suffers. What they should be looking for is your entrepreneurial drive coupled with the ability to be a team player.
______6. Does the representative of the franchisor encourage or discourage prospects from showing the agreement to an attorney prior to execution? The franchise agreement details the mutual responsibilities of the franchisor and the franchisee. Encouragement to show the agreement to a franchise attorney is an indicator of the confidence the franchisor has in the system. A desire on the part of the franchisor to have the potential franchisee fully understand the commitment he will be making is a positive sign.
______7. Is it obvious that the franchisor conducts a thorough investigation into a prospect's background? The master franchisor owes it to you to do so in order to determine the suitability of you for the franchise system and of the franchise system for you. In fact, quality control and a performance clause should be written into the franchise agreement. The franchise owners who are suited to the system will succeed in performing to standards and be an asset to the overall system. Make sure that the franchisor has the right to protect the strength of the system, the integrity of the franchise agreement and the rights of the other franchise owners by terminating non-performers.
______8. Has the nature and extent of the franchisor's training been clearly explained, especially the cost issues? On-going training and updated programs should be available to you at no charge. Part of buying into a franchise system is having regularly scheduled training classes that the franchise owner and staff can attend, held in close proximity to their business. A commitment to frequent monthly training is another tool toward profitability.
______9. Does the franchisor have specific programs in place for the location and/or approval of suitable site and staff? Such programs are an indicator of the franchisor's commitment to insuring maximum profitability for its franchisees right from the start. Be careful that your franchisor does not have an uneven program, heavy on opening programs but with no consistent support throughout the term of the contract.
______10. Is the franchisor purely a franchisor or are there company-owned outlets? Company-owned outlets can place the master franchisor in the somewhat contradictory position where it is in competition with its own franchisees. That could result in divided loyalties on the part of the franchisor, with its primary loyalty lying with the company-owned stores and franchisees coming in second-best. (Editor's note: Although Ms. Jensen's point of making sure that the franchisor's first concern is the success of its franchisees is well taken, many franchise experts feel it is important that a franchisor maintain some company-owned outlets. These allow it to research and develop new products and services and work out the bugs in new programs, without putting its franchisees at risk.)
______11. Does the franchise organization have a substantial track record of growth, and, if so, how can this be harnessed to my advantage? The master franchisor must grow the system to benefit the franchise owners. The protection and enhancement of the franchisee's investment means adding outlets, thus harnessing for the franchisees the advantage of strength in numbers, also known as "clout" and brand name image. The franchise system that does not consistently expand, in a controlled manner, is doomed to failure.
______12. Does the franchisor provide a system of localized on-going business consultation for franchisees? On-going business consultation "hands-on" and by telephone should be part of the support system provided by the master franchisor to help move the franchisees toward profitability. Such consultation often eliminates problems before they develop and resolves existing problems before they become unmanageable. Make sure the franchisor and its staff have expertise in sales, marketing, internal operations and management.
______13. Does the franchisor provide localized on-going training for franchisees for the length of their contract? Monthly classes held in close proximity to the franchise assure the franchise owner that profitability tools are easily within reach. On-going training insures that the owner can return anytime he wishes to refresh himself on the latest marketing tools at his disposal.
______14. Do the franchisees have a mechanism for two-way communication with the franchisor through local franchise owners's associations? Franchise owners's associations provide a forum for owners to solve problems collectively and decide the best course of action on items that affect all the franchises. Franchisor and management staff should be in attendance at all meetings.
______15. Does the franchise provide for a strong image-building program at both a local and national level? Nationwide identity begins from the first day a franchisee opens the business under the franchise agreement. An on-going goal and commitment of the master franchisor is to provide an image that becomes more well-known nationally with every passing day through intelligent use of the advertising fund. The franchisee pays into this advertising fund to create awareness of the name and services with which he is associated. People equate success with size. The franchise owner expects the value of his investment to be enhanced by consumer awareness of the franchise name both nationally and locally. Most successful franchises also provide for the franchisor to contribute to the advertising fund.
Having all these questions answered to your satisfaction will give you the information you need to select the franchise that will best provide you with the opportunity to achieve the success you seek. After you have identified the organization that best suits your needs, interests and objectives, the rest is up to you. Following the prescribed program established by the franchisor then gives you the best chance of realizing your personal and professional goals. Good luck, and good shopping.