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Franchisee Checklist – Assessing the Franchisor
A crucial step in researching a franchise system is analyzing the franchisor and franchise system you are interested in becoming part of.
Consider the questions below about the franchise you are considering buying.
The Franchisor's Company
- How long has the franchisor been in business?
- What business experience and qualifications do the franchise's directors and managers have?
- Have they or the company been involved in any litigation or court judgments? How were these cases settled?
- Is the franchisor on solid financial footing? Ask to see audited financial records for three years.
- Is the franchisor a subsidiary of another company, and if so whom? Is the parent company soundly financed? Ask to see their financial records as well.
- How particular is the franchisor when selecting franchisees? What selection criteria do they use?
The Franchise System
- How long has the company been franchising?
- Has the franchised business been thoroughly proven in practice? (Keep in mind newer franchises can be just as successful as older ones.)
- Is there a strong, distinctive trade name associated with the product or service?
- Are the products produced by a patented method or is the service based on an exclusive process?
- Is the product or service defendable (i.e., how vulnerable is it to imitation and/or competition)?
- What is the franchisor’s plans for expansion? How fast do they plan on growing? Is it possible that the company will overstretch its capabilities?
- How does the franchisor deal with failing units?
- Does the franchisor, and/or the parent company, operate any units of the franchise? If so, would they be in competition with you?
- If there are known competitors, does the franchise in question have any distinct advantage over them?
- What does the franchisor see for its future? Does it plan to enter new areas of business? What kind of innovations could be on the horizon?
The franchisor’s plans for expansion
Other Questions About the Franchise
- Is there an awareness of the brand in the country or state in which you want to locate it?
- If the franchise comes from another country, how successful has it been in its own and any other markets it's operated in?
- Are the franchise's prices competitive and can this competitiveness be maintained?
- Does the product or service have long-term market appeal, or could it be a passing fad or fashion?
- Can you interview some of the existing franchisees?