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Information That Will Benefit Franchise Candidates and Franchisors

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When selling a franchise the franchisor should provide the franchise candidate with the information necessary for making an informed decision. On the other hand, the franchise candidate should know what information they require before making their decision. This article provides advice for both parties.

When selling franchises, franchisors should provide prospective franchisees information that pertains to all aspects of the franchise operation. In addition, franchisor staff will be asked particular questions by the candidate.

However, there is some information a franchisor may not provide and questions that a franchise candidate may not ask. Whether or not this lack of information can negatively impact the future success of a specific franchise is unknown. My position is that the franchisor has an obligation to provide a prospective franchisee as much information about the franchise opportunity as possible, while complying with franchise disclosure regulations. The information provided by a franchisor will help in the franchise sales process, while educating the prospect regarding the franchise. The end result should be an informed and intelligent decision by both parties pertaining to the possible purchase of a franchise.

An important consideration regarding the decision to purchase a franchise is based upon the ability of the new franchisee to effectively develop sales in his or her market. Any additional information pertaining to the market will be of benefit to both franchisor and franchise candidate.

The additional information should include the following:

The composition of the market including demographics, where the franchise will be located. This information includes actual and potential revenues, number of firms and any large or dominant players in the territory. The nature of the competition and how the franchise can effectively meet the competition. Are there certain critical success factors that relate to the successful firms in the same industry segment? Try to use examples of firms that are leaders and what sets them apart from the others. Credible and recent financial data and statistics pertaining to the industry. U.S. Commerce Department reports are an example. Key attributes of the franchise such as location and marketing techniques needed to succeed.

This is information that a franchisor should provide to a prospective franchisee. In some cases the franchisor may advise the candidate to gather some of the information on their own. In any case, franchisors should include this component as part of their franchise sales process. By following this approach franchisors will be providing prospective franchisees the information that will enable them to make a better decision regarding the franchise. The result can benefit both parties.

2011 FranchiseKnowHow, LLC

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

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