Is That Franchise Worth The Risk?
With so many franchise opportunities available in today’s market, you need to make sure that it really is worth the risk. For you to be able to spot these risky opportunities, you need to see the warning signs, that could result in potential problems for you.
To help you eliminate risky opportunities we have made a simple but effective list that should help.
How many franchise units/locations?
This is should be your first piece of information you gain in your investigation. Find out how many they have and whether this is a growing number or declining. If it's the latter then find out why.
Has there been an increase in litigations between the franchisor and the franchisees. Normally when a franchise is going through difficult times, you will see an increase in the number of litigations. This should be seen as a major red flag.
Store sales trends
This information may be much harder to gain, but make sure you ask the franchisor or franchisees. You want to be asking and gathering information about same store sales figures and whether or not there has been an increase or decrease. If there hasn't then you may be buying into a business which despite your best efforts, may never turnover more.
Speak with existing franchisees. This will give you a clearer understanding on how good the franchisor is, at set-up; training; financial information; good and bad points. When in the latter stages of your investigation and your close to joining, you should spend a day with other franchisees to get a more complete picture of the franchise. You need to ask three simple questions:
- How have the last couple of years been as a franchisee?
- How do you feel about the business?
- Would you do it again if you had the choice?
By gaining the information above you should improve your chances of avoiding risky opportunities and instead find the right franchise for you.