A franchise seems like a sure-win situation on the surface. You will be carrying a famous brand name with a product that has already gained some success. All you need to do is invest and manage since the mother company will take care of the advertising.
You will have the tested products of a big company. What could go wrong? Many things, actually. There have been unsuccessful franchise ventures even for the most well-known brands. More than a case of mismanagement, it is more about failed projections and a lack of preparation. Thus, it is better to answer these questions before taking advantage of fast-food franchise opportunities.
Does the franchise have a defined market?
For many franchises, the short answer is yes if it’s based on their sales and popularity in the present. However, for a complete investment return, you must check whether there is a real, defined market. You should also check whether the company is in growth or decline mode.
Does the franchise have a spotless company history?
The franchisee needs to put in their due diligence and learn about the officers or management of the franchise. With this, you will gain better insights into the company’s principles and culture. Key points to check are the experience of the top brass, as well as their credibility.
Does the company have a stable history? You can utilize the Franchise Disclosure Document (FDD), which applies to all franchises. However, they require that the franchisee has already passed an assessment as a serious candidate before disclosure. It is worth it, though, since you can gain access to the complete history, including litigation and bankruptcy documents. You can also access their financial statements and have them assessed by a certified public accountant.
Do you have what they require?
Background checks go both ways. The franchisor also has specific requirements for their would-be franchisees. You should provide a personal inventory of how much you can spend. They will also need to check your liquid capital, assets and liabilities, and your net worth. If you do not have enough money, the franchisor might deem that you are not fit to carry their brand since you will not be able to fulfill the requirements of opening a restaurant fit to their standards.
Does the company provide training and support for your personnel?
Part of what you’re paying for is the company’s experience in the industry. As such, they should be able to provide training programs and support systems for your personnel. They should also share their know-how and strategy for the actual operations. On this regard, you can seek feedback from other franchise owners on how much help the franchisor provides when faced with challenging situations.
The relationship between a franchisee and its mother company is described as mutually beneficial. The company provides the franchisee with the strategy and tools to build a business and make a profit for himself, while the company extends its territory aside from their share of the profits. If both sides deliver their side of the deal, then it will be a sure-win situation.
