As THE ECONOMY GROWS, GLOBAIZATION SPREADS,
AND CONSUMPTION INCREASES,
there will be many suppliers [ LOCALS/FOREIGN]
Who will be offering franchise opportunities.
This will raise many questions in the minds of
intersted parties, like
*WHAT IS A FRANCHISE ?
*WHAT ARE THE PROS AND CONS ?
* WHAT DO YOU KNOW ABOUT THE FRANCHISE/
*WHAT QUESTIONS TO ASK THE FRANCHISOR?
*QUESTIONS TO ASK YOURSELF ?
FRANCHISE PROS AND CONS
ADVANTAGES FOR FRANCHISOR
-new point of customer sales
-new distribution points
-sales promotions activity point
-promotion of the corporate brand
-promotion of the company product brand
-control over the business
-direct control of selection/approval of sites
ADVANTAGES FOR FRANCHISEES.
-use of large corporate name / image
-get access to expertise
-established branded products
-set up support
-on going coaching
-proven business plan
-leverage of successful brand
-advantages of successful business concept
-proven business process
-products familarity in the market
-lower costs due to bulk purchase
-support / help in site selection
-support of operating manual
START FRANSCHISE -- WHEN
WHEN YOU ARE
-ready to grow fast
-ready to extend distribution geographically
-products need customer service at the point of sale
-lack financial resources to grow on your own
-do not want to invest your own resources
-does not need highly/technically skilled manpower
-needs rapid decentralized distribution
-needs rapid decentralized business operation
-needs indirect control of outer territories
-product does not need high technical service
-have resources constraint
-do not want people on your payroll.
FRANCHISE SELECTION CHECKLIST
FRANCHISE opportunities are very tricky in selection.
They tend to be easy to make money. But in most cases
have to work hard.
THE FOLLOWING CHECKLIST COULD HELP YOU TO
BRING DOWN YOUR ERROR IN JUDGEMENT IN
THE SELECION PROCESS.
I.Reputation of the franchisor. *how long has the franchisor co. been in
2 *If it is a new co., how long has the concept been tested ?
3 *Who are the principals'?
4 *What are the qualifications of the people?
*What are the current / future plans of franchisor?
*Is the franchisor registered with franchising council?
*What is the financial standing of the franchisor?
*Have you questioned/surveyed any current franchisee[s]?
2.Franchise product/service. *what is the market image for the
*Would you buy/use the product / service yourself?
*Are you prepared‑next 3to 5 years to sell/manage this business
*Is this product all year round or seasonal product ?
*What is the demand pattern for this product /service?
*How is this product priced ‑‑up market/low price/ average?
*How is this kind/similar products sold currently?
*What are the selling restrictions?
*Are you entitled to new developments/trademarks/ etc?
*what is the profit margin?
*is the franchise sales area geographically defined?
*do you have exclusive right in this area?
*what is the sales potential in this area?
*what is the nature of competition direct/in direct?
*are the existing franchisee successful?
*what are the rights / obligations ?
*cost of termination.
*cost of Joining.
*can you sell the franchise with franchisor's consent .
*who gets the goodwill when the franchise is sold?
*what are your payments to the franchisor‑‑fixtures/advertising/
initiaI stock/royalty/legal/security etc?
*what are the cost associated with setting up?
*can you sell other merchandise?
*is there a monthly target ?
*is there an annual business plan?
*does the franchisor provide ongoing support
*is there a handbook?
*does the franchisor provide accountancy assistanc(
6.CHECK FRANCHISOR'S PERFORMANCE.
*check a number of franchisee in different territories
*check your own ‑‑‑ health, can you manage?
*finance,can you manage or loan?
*your aptitude for this business?
*your attitude fot this business?
FINALLY ARE YOU REALLY PASSIONATE ABOUT THIS
IT IS THE PASSION* THAT DRIVES TOWARDS THE SUCCESS.
WHAT QUESTIONS SHOULD YOU ASK THE FRANCHISOR?
1 . What exactly will you do for me that I cannot do as easily for
2. What am I expected to do for you?
3. How do I know if I can successfully operate a franchise?
4. Do I need any special experience?
5. Will the franchise company investigate me?
6. How long has the franchise operation been in business?
7. How many franchises are now operating?
8. Where are they located?
9. How many have failed so far? Where are they?
10. May I call and see your franchisees at their places of work?
11. May I ask them questions about their business?
12. May I see the net profit figures for a number of your franchised
13. Will the products yourfranchises sell still be in demand five years
How do you know?
14. Is your franchised business active all the year round, or are some
periods traditionally busier than others? Seasonality affects a number of
franchises, but their busy periods compensate for the slower ones.
15. Has a market survey been done on the area where I am
contemplating becoming a franchisee?
16. What is the current and potential competition within my designated
17. What is the exact and exclusive territory included in my franchise?
18. For how long will I be guaranteed my franchise?
19. What renewal options on my contract can I expect?
20. If premises are involved, who holds the head lease?
21. What products or services can I see?
22. What restrictions apply to how I use the franchise trademark or
23. Do I have to stock minimum inventories of products?
24. Do I have to sell certain minimum amounts each week/month/ year?
25. Do I have to buy my stock from the franchisor?
26. What if I find better prices elsewhere?
27. How much is the franchise fee?
28. Please spell out the royalty fees in detail.
29. What other costs will I be liable to pay?
30. Who determines the prices at which I sell my stock?
31. I know that I will be expected to send detailed reports on a regular
basis, but who pays for their cost?
32. What will I be expected to contribute towards advertising and
33. Will you help me to raise the capital I need to become a franchisee?
34. What credit terms do you offer on stock for my franchise?
35. Will I be able to choose the location of my franchise?
36. What help will I receive in finding a good location for my franchise?
37. What pre‑opening, opening and post‑opening assistance will 1,
38. What training is provided for me and my staff both before and after
39. What manuals are provided? (operations? training? sales?)
40. What help will I receive with each of the following?
merchandising and marketing ideas
designing layouts and displays
41. What trouble shooting help can I expect?
A2. How much of my money will I get back if my franchise fails?
,43.What are the rules governing my rights to sell my franchise?
,44.What if I want to transfer ownership of my franchise to another
45. What termination rights do each of us have as franchisor and
,46.What are the exact conditions under which you have the right to
cancel the franchise?
,47.What happens if you as the franchisor go into liquidation?
48. What if I go bankrupt or into liquidation?
49. What happens to my franchise if you, the franchisor, die
50. May I take the contract away now for my legal advisor to study
51. Do you subscribe to the Franchising Code of Practice? If not, why
SOME ADDITIONAL QUESTIONS
I TO ASK FRANCHISOR
1.How many franchises are now operating?
2.Where are they located?
3.How many have failed so far?
4.Has a market survey been done in this
5.What is the current and potential competition?
6.What is my exclusive and
exact territory ?
7.For how long will I be guaranteed my franchise?
8.Who holds the tease to
9.What restrictions apply to the use of franchise trade mark?
10.How much is the franchise fee?
11.What is the royalty fee ?
12.Who determines the prices of the products I sell?
13.Will you help me to raise the capital ?
iiij post opening
assistance will I receive?
15.How much money will I get back if my franchise fails?
16.Can I sell the franchise ?
17.Can I transfer the franschise to another person ?
18.Under what conditions you will cancel my franchise ?
19.What happens if the franchisor goes into liquidation?
20.What happens if I go into liquidation ?
Questions to the potential franchisee
1. Can you list the real reasons why you wish to become a
2. Can you list the negative aspects of being a franchisee
which might irk you?
3. Do you know where you are going to raise the capital you
will need to open your franchise?
4. Do you know that you can get it?
5. Just how knowledgeable are you about the franchise you
are proposing to buy?
6. Are you prepared to give up a large degree of your
independence and work under the control of your franchisor?
7. Are you prepared to support yourself for a prolonged
period whilst you learnhow to succeed as a franchisee?
8. Do you have a realistic assessment of how much you
might spend ‑‑before you begin trading?‑within the first six
months after opening?
9. Do you have a realistic idea of what your net income (after
tax) will be in the first/second/third years?
10.Does the anticipated revenue represent a good return on
12th April 2006 From India
Dear Mr.Leo Lingham,
That's an wonderful contribution from you on FRANCHISE BUSINESS. Thanks for spending time to write such a detailed presnetation, which will be useful to many persons like me.
13th July 2006 From India
Dear Lingam I would to have your inputs for franchising for a IT training company. Any agreement copies ??
4th June 2008
The typical franchisor begins as a small, locally owned business that has achieved some success in their neighborhood. Typically, they start on the path to franchising when a customer asks them how they can open a similar business; this question is often the trigger that results in new franchise systems being born. Over the next few months, the local business owners will work with lawyers, consultants, accountants, bankers, web designers and other professionals to design and develop the franchise system a considerable investment.
This investment can also be risky, because no one can guarantee the emerging franchisor that anyone will ever choose to become their franchisee, regardless of how much they have invested in developing the system. Opening any business is risky, and both the franchisor and franchisee are risk takers.
Once the franchise system is ready, the emerging franchisor will generally spend months investing in advertising and marketing to recruit their first franchisee. If they are lucky, three or four months after they start offering franchises, their first franchise agreement will be signed. And if everything goes right, another nine months will pass before that first franchisee gets their location open and begins to pay the franchisor any licensing fee.
Franchisors and franchisees are independent businesses that share a brand under a licensing agreement. From a practical point of view, the role of a franchisor is to grow their number of franchises and to support those franchised businesses before and after they are open. The role of the franchisee is to serve the public branded products and services in their local markets to the quality standards as defined by the franchisor; the franchisee has control over the day-to-day management of their business, including their employees.
Both the franchisor and franchisee are independent businesses the only real control that a franchisor has over its franchisees is ensuring that the systems shared brand experience is delivered to the same level of quality that consumers expect and the law requires. The power of franchising is that over the past 230 years, we have learned how to share a brand and achieve the goal of consistent sustainability by allowing independent business people to own and manage a business, and in the process create for themselves wealth and vital local employment opportunities.
10th September 2019 From India, If you are knowledgeable about any other fact, resource or experience related to this topic - please add your views using the reply box below. For articles and copyrighted material please only cite the original source link. Each contribution will make this page a resource useful for everyone.