How Should I Evaluate a Franchise Opportunity?


Franchisor Management-review the management background and experience of key franchisor executives and support staff. 

Franchisor Market-ensure the market is a suitable market for your product where customers will have demand for the product. In addition, for your company to be portrayed correctly with a positive brand name. 

Franchisee Fees-identify if the franchisor charges other fees for services above and beyond any royalty and ad fund fees. Additional continuing fees for software usage and licensing fees, when added to royalty and ad fees will increase expenses. 

Financial Statements- Unless the franchisor is a start-up there should be three (3) years of audited financials available. Look for a continuing and growing stream of revenues from franchisee royalties.

Required Suppliers and Rebates- Does the franchisor require purchases from specific vendors? In addition, does the franchisor receive rebates from vendors and suppliers and if yes, how much? Many rebates from required franchisee vendors could compromise the trust between a franchisor and its franchisees.

Intellectual Property- Does the franchisor have any confidential, proprietary information or trade secrets that distinguish the franchise from the competitors. Also, does the franchisor have the marks trademarked?  

Franchisor Training Programs- Franchisee training should be comprehensive and presented by more than one person. Training that includes a portion of onsite training for new franchisees provides real world franchise experience that the classroom can’t duplicate.

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