3 Factors to Look Out For When Choosing a Franchise – FranFinders

Here are 3 warning signs that you absolutely must keep out an eye for when choosing a franchise.

It is not very common to run into articles that mention this topic, but I encounter companies like these on a regular basis. It is my duty to warn our clients about them before becoming fully engaged in the process. Here are the top three factors you should be aware of when choosing a franchise companies.

Beware #1: When the franchisor does not seem to have a clear vision of their opportunity. The franchisor should be able to answer the following: “What is their total investment? What consists of their marketing plan? Do you publish earnings claims and how did you arrive at those numbers? Do you up-charge me for my equipment, supplies and software tools? Do you offer funding?” This usually appears in some newer or under-capitalized brands. It is a red flag if the franchisor is not able to articulate a clear and definitive answer to these questions. If they are dodging them, it reveals that they are not confident of their brand. In my experience, it is better to ask the franchisor to prepare a PowerPoint addressing all those items early in he process.

Beware #2: When it is Discovery Day and the franchisor is not offering or avoids meeting you in person. In order to find out if it is a good fit for one another,  you should each have a chance to evaluate the property. The best way to do this us by meeting at the franchisor’s headquarters. In the past, I have had some franchisor’s want to meet candidates through Skype, but I personally believe that you are better off meeting the CEO, and their staff, so that you can size up one another and determine if you are a good fit.

Beware #3: The franchisor has failed to perform what they promised in their discussions. Since franchising is a heavily regulated industry, the laws are designed to protect franchise candidates. However, in the courting phase, often the candidate will discuss items that are most important to them and they don’t get these concessions in writing.

When they are ready to sign the agreement, the candidate is upset because the franchisor may charge extra fees for their concessions. We once had a candidate who was ready to sign the agreement and wanted a larger territory. The franchisor agreed to one fee but when the agreement was presented to the client, the price was much higher.

Additionally, I have seen, with some of the poorer run franchise companies, that they make promises on their marketing and advertising programs, only to find out that they did not deliver what they promised.

Keep your eyes wide open in the courting process and use experts, such as an experienced Franchise Consultant, Franchise Attorney and a CPA.

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Sue Bennett is the Co-Founder of FranFinders, a franchise consultancy and funding group. At FranFinders, we are more than franchise consultants. We are “Your Partners.” Throughout your franchise search, from the Initial Call to your Grand Opening, we are with you “Every Step of the Way.” By partnering with us, you get our Experience, Knowledge and proven 10 Step Franchise-Buying Process that will bring Clarity and Direction to your franchise search. Gain Confidence, knowing that you are partnering with professionals.