CHECKLIST OF QUESTIONS TO ANSWER
BEFORE YOU BUY A FRANCHISE
Franchise businesses such as Wendy's, McDonald's and Jack-In-
The-Box are booming. The people setting up franchise ideas and
businesses know a good thing, and are really promoting this idea.
Franchises for just about every conceivable kind of business are
being sold in ever increasing numbers. Some franchises are very good. They treat both the franchisor
and the franchisee very well. Others are very one-sided. Still
others are almost total rip-offs that trap one into paying ten to
fifty times the actual value of the business idea, equipment, or
what ever it is they are trying to get you to buy. Before putting any money into a franchise, you should
investigate everything completely. We've prepared a list of
questions you should be asking, and should get satisfactory
answers to before investing. 1. Has your attorney studied the franchise contract,
discussed it completely with you, and do you both
approve it without reservations? 2. Does the franchise require you to take any steps which
are either illegal or even border on illegal, or are
otherwise questionable or unwise in your state, county
or city? 3. Does the franchise give you an exclusive territory for
the length of the franchise period, or can the
franchisor sell a second or third franchise in your
territory? 4. Is this franchisor connected in any way with any other
franchise company handling similar products or services? 5. If you answered yes to the above question, what is your
protection against the second franchising company? 6. Under what circumstances can you end the franchise
contract, and at what costs to you? 7. If you sell your franchise, will you be compensated for
your goodwill or will it be lost to you? 8. How many years has the firm offering you the franchise
been in operation? 9. Does the company offering you this franchise have a
reputation for honesty and fair dealing among its
franchisees? 10. Has the franchisor shown you any certified figures
indicating exact net profits of one or more of its
members, and have you personally checked the figures
with these people? 11. Will the franchisor assist you with: a) A management
training program; b) An employee training program;
c) A public relations and advertising program;
d) Capital; e) Credit; f) Merchandising ideas? 12. If needed, will the franchisor assist you in finding a
suitable location? 13. Is the franchising firm adequately financed so that it
can carry out its stated plans? 14. Does the franchisor have experienced management, trained
in-depth? 15. Exactly what can the franchisor do for you that you
cannot do for yourself? 16. Has the franchisor investigated you carefully enough to
assure itself that you can successfully operate at a
profit to both of you? 17. Does your state have a law regulating the sale of
franchises, and has the franchisor complied with that
law to your satisfaction? 18. How much equity capital will you need to purchase the
franchise and operate it until your income equals your
expenses? If you can get the answers to each of these questions, and
those answers satisfy you, then you're probably thinking about
buying a pretty good franchise deal. However, if you're in doubt
about any of these points, be sure to check it out and know the
answers for certain before you invest or sign anything. Buying a franchise can give you a measure of security, and in
some cases, sure-fire profits. Business surveys show that fewer
than 20 percent of all new franchised businesses fail. This is in
comparison to a 60 to 80 percent failure rate for all new
businesses started in this country each year. Information regarding specific franchising ideas can be found
in the franchising directories, which are generally available at
the local library. Often there will be a notice posted in
franchise outlets themselves. If you can afford the entry into this business, statistics are
on your side. You are now armed with some CAUTION and STOP and GO
signs!