Franchise Q&A
Q&A
through all the processes required, and provide both sides with suffi cient information upon which to base an informed decision. This should include a two-way fl ow of information. The franchisor should provide concept and industry-specifi c information and, after non-disclosure documentation has been signed, specifi c information on the fi nancial performance of the business and how the franchisee will be expected to operate the business. The prospective franchisee should provide information on themselves, their background and experience, and again, as the process progresses, detailed business plans showing how they plan to structure their business, what their own fi nancial goals are and their territory-specifi c research. This process should include several face-to-face meetings, perhaps starting with a group Discovery Day, and moving on to personal, one-to-one meetings with key individuals in the franchisors’ business. Prospective franchisees should also have the opportunity to speak to and meet with existing franchisees . This due-diligence process is often managed by an experienced franchise consultant, who can take an external and unbiased view of the candidate, and ensure that they have the right skills and experience, and that they have been given suffi cient and accurate information upon which to base their decision.
[Q] How can I judge whether a franchise will be resilient in the long term? What should I be looking for?
[BIO] NIGEL
TOPLIS is managing director of Recognition Express, The Zipyard and Computer Xplorers.
[A] As with anything in life it is never easy to predict the future and one can never say
that any business is ‘guaranteed’. There are, however, certain steps one can take to best evaluate the robustness of a franchisor and their business and here are the top 10 considerations I recommend:
• If they are members of the bfa then the franchise will have undergone rigorous checks
• If the business has been going for a number of years then there is a better chance that they have survived
economic turmoil
• Look at the level and quality of support from the franchisor – do they proactively cover marketing, training, operations and fi nance as the key aspects of any business?
• Check that the franchisor has real support people – not just ‘telephone support’
• Does the business have multiple income- streams? Or is it reliant on one product or service?
• Does the franchisor make most of their money through ongoing royalties based on franchisee performance (my favoured) or mainly through recruiting new franchisees?
• Does the franchisor have a history and reputation for introducing new products to their network?
• Ask for the franchisor’s most recent three years of accounts
• Speak to a selection of franchisees • Ask the following – do you feel the industry is robust? Is there a big enough market in your territory? Can this franchise successfully access the market?
Contact details
Email your questions to:
editor@businessfranchise.com
March 2012 |
Businessfranchise.com | 17
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