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Tips for Qualifying a Franchisor

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A competent franchisor will qualify every franchise prospect to minimize the risk of a failing franchisee. So too, a prospective franchisee should qualify a franchisor to minimize their possibility of failure.

Launching a new franchise is the beginning of a contractual business relationship, with typically a ten year term and an option for additional years. Investing in a franchise is an important decision with the potential for life altering consequences. Quality franchisors have a franchising process that they follow which includes a method for qualifying franchise candidates. Some even require a candidate to take a test in order to enhance the franchisor selection process. From a franchise candidate perspective, itís safe to say that the majority of individuals interested in a franchise donít have a process for qualifying a franchisor. Because the franchisor represents a major component of the franchise relationship, itís important to gain as much knowledge about the franchisor as possible. As I often say ďItís easier for a franchisor to recover from selecting the wrong franchisee than it is for a franchisee to survive from selecting the wrong franchisor.Ē

 

Here are some tips that can help you qualify a franchisor:

Follow a process for identifying franchise programs that meet your personal, business and financial profile. I provide this information in my last book: The Franchise Buyers Manual.

  1. At the beginning notice how a franchisor handles the sale of new franchises. Do they use franchise brokers, rather than an in house sales staff? If they do, it may indicate that the franchisor is looking for fast growth or may lack the capital to fund its own sales staff.
  2. Was your request for franchise information handled on a timely basis?

Did you receive an e-mail acknowledging your interest in the franchise?

Do your e- mails or calls to the franchisor sales staff generate a prompt response?

Poor performance by the franchisor in this fundamental area can mean that they are understaffed, overwhelmed with requests or not as responsive as they should be. Keep these things in mind at the start of your inquiry into a specific franchise opportunity.

  1. Franchisee Feedback is your most credible source of information regarding the franchisor. Contact existing franchisees before you get too deeply involved into the franchise process. A number of prospective franchisees wait until the end of the franchising process before speaking with existing franchisees, which means after investing time and money, one of most important sources of feedback comes last. Use this opportunity to learn about the franchisor. Here are some questions that will help you put the finishing touches on your franchisor profile.
    • Has the franchisor delivered as promised?
    • If no, what happened?
    • Have you had a need to seek assistance from the franchisor and if yes how did they respond?
    • Do the franchisor staff and senior management respond promptly to e-mails and phone calls?

 

  1. Discovery Day represents a critical step in the franchising process since youíll meet with the franchisor staff on a face to face basis. Some franchisors try to schedule the corporate visit at an early stage in the franchising process. Unless the franchisor is a short drive away, you should delay the visit until youíre near the end of the franchising process. When you make this visit your focus should be to gain more knowledge regarding the franchise by asking questions that can provide further insight into the franchisor. Here are areas to consider.
    • Did you receive an agenda prior to the meeting?
    • Did the key members of the franchisor staff participate?
    • How helpful was the franchisor regarding your travel and lodging requirements?
    • Were you able to meet a key member of senior management?
    • How responsive was the franchisor to your questions or requests?
    • If the franchisor staff is aggressively trying to sell the franchise it can be a "red flag." Typically, a solid well managed franchise company wonít take this approach.

Before making a final decision to invest in a franchise, individuals with an interest in a specific franchise opportunity should thoroughly qualify the franchisor and not limit their evaluation to just a few areas.

 

© 2013 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

 

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