How to Pick a Franchise

Surprisingly, Australia is one of the most franchised nations in the World.

With Australians embracing franchising so much, potential franchisees are spoilt for choice.

So, how do you choose the franchise system to invest in?

Below is a checklist of some of the matters potential franchisees should be considering in their decision making process.

1. Self-Audit

Firstly, a potential franchisee should assess whether they are made to be franchisees.

Generally speaking a franchisee should be able to take and follow direction.  Although the franchisee is not an employee they are still required to follow the reasonable directions of the franchisor.

If you are an entrepreneurial type, franchising might not be for you. 

One of the strengths of a franchising systems is often the strict systems and guidelines which franchisees must follow.

If you pass the first test then you must ensure your family are supportive of your business decision to become a franchisee and to operate your own business.  Family support can be vital when you are first starting out in a business.

Make sure you have sufficient funds to support yourself while your business is building up, you need to ensure you have enough money to live off, to meet your debts and to run your business while you work on increasing your sales and income.

2. Product

Do you have an interest in the product or service the franchise provides?

It is all well and good to be attracted to the financials of the business, but it is a lot easier to operate a business day in and day out if you are interested in the goods or services it provides.

If you are more of a beer and pies type of person perhaps a gym franchise is not going to be a marriage made in heaven for you.

3. Franchisor

Do you like the franchisor?  Will their staff be easy to deal with?

Especially at the beginning of the franchise you will have a lot to do with head office.  These will be the people you are dealing with and it will make life a lot more pleasant if you like each other.

Ask current and past franchisees how the franchisor and the staff are to deal with and if they are helpful and respond to requests for assistance quickly.

4. Interview Franchisees

You need to speak to as many franchisees as possible.  These are the people living the life you may soon be living, nobody can give you a better insight.

5. Interview Past Franchisees

These people may give you a invaluable insight into things you should be concerned about.  Ask them why they left and how the franchisor was to deal with as they parted company.

6. Training

Consider if the franchisor will give you enough training to equip you to operate the business.  What else are they prepared to give to you to help to ensure your business is successful?

7. Read the Disclosure Document

The specific purpose of the disclosure document is to give you information to help you decide whether you should invest in that franchised business or not.  You should read it and you should seek legal advice about what it all means.

The disclosure document includes a lot of information about finances including the costs of operating the franchised business.  You should see your accountant to make sure it all stacks up. 

8. Franchise Agreement

Again, read the franchise agreement.  It governs your relationship with the franchisor, get advice.  Make sure you are aware of your obligations and rights.

Conclusion

Sometimes franchisees can get carried away with the franchisor's enthusiasm and marketing spiel.  Poor decisions can be made in these circumstances.

Remember, with so many franchises available, you have the luxury of choice and you should take your time to make sure you make the right choice.

This information is of a general nature only and is not to be regarded as legal advice.  There are many matters a potential franchisee should consider and potential franchisees should seek professional advice.