Evaluating a franchise
- The franchisor should provide an information pack. The prospectus should answer all the basic questions. After early discussions and an initial interview and confidentiality agreement, you will get the key information needed to conduct due diligence.
- Do as much research as possible. Gather information from a variety of sources.
- Get enough detail to give you a broad understanding of the business concept. What is the business? Which trading locations or territories are being offered? Who are the competitors?
- Find out about the franchisor. How long has the business been trading? How long has it been a franchisor? What experience and achievements do the key people have? Is the franchisor completely independent?
- Check how much support you will receive. What training is provided at the start? Will you get help to set up the business? Some franchisors will provide advice on the premises and equipment you need, legal support. What continuing support is provided?
- Can you get help when you need it?
- Check the terms of the franchise agreement. How long will the franchise agreement run (typically five to ten years)? Check whether you have an option to renew the franchise after this time. Will you have exclusive rights in your area for the full term of the franchise?
- What conditions and restrictions are there if you want to sell the franchise? What happens if you die, or if you cannot continue the business?
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