If you are considering becoming a business owner by purchasing the rights to a franchise a vendre then you need to prepare for a lot of hard work. Sure, this process is a little easier than if you were to try to build a brand new business from scratch, but there is still a lot of work involved with getting your franchise off the ground.
But that is a good thing; it ensures that you make a smart investment. As such, you should keep in mind these tips—ask yourself some of these questions—to make sure you are definitely making the right decision.
#1: Is there Consumer Demand?
If you want to open a restaurant franchise the very first thing you want to establish is whether or not there is consumer demand. Do people want to eat what you make and serve? Is this a growing area where something like your restaurant concept might do well in the future? Is there any competition for your concept? And if there is, will consumers appreciate it or will they stay loyal to what they know?
#2: How Healthy are the Finances of the Franchisor?
Once you have determined that consumers would patronize your business you need to next look at the financial statement of the franchisor. This is the person or entity that would be selling you the franchise. Does the company have enough money and momentum to stand on their own (without your fee, for example)? Always make sure that the company is responsibly managing the franchises they have. It is also important to understand the compensation schedule and what, exactly; your franchise fee pays for (because you don’t want to have to pay extra for certain tools, materials, or assistance).
#3: Does the Franchisor Have Seasoned, Updated Market Intelligence?
Indeed, you need to know if the franchisor is good at researching the industry to follow trends and stay ahead of shifts. Potential growth in a new market is one thing, but if the trend for this concept is on its way out, investing in a new market might not be the smartest thing.
#4: Do You Understand the Proposed Legal Agreement?
Make sure that you closely go over—and probably also have a lawyer do this—the contract. Only sign it when you fully understand every single aspect of the agreement.