Franchising: Questions You Should Ask A Franchisor

Franchising: Questions You Should Ask A Franchisor

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If youre starting a business, you may have considered purchasing a franchise rather than starting a company from scratch. This is particularly common in certain sectors, and has many solid advantages over starting a business on your own. However, before you commit anything, its important that you ask the franchisor the right questions to get to grips with exactly what youre going to be buying.

Which services are covered by the management fee, and which services arent?

Some franchises will involve the central business doing all of your marketing for you, and for others it wont. Some businesses will handle all of your customer service, and some wont. That is why its important to find out exactly what youre buying, and what expenses you will have to account for on your own.

Can I sell the franchise, and will your business help me sell it?

When you buy a franchise, you are buying a business asset. And, usually when you buy an asset, you should be able to sell it. However, most companies will have rules about exactly what you can and cant do. Be sure to clarify this with the franchisor before you commit.

You should also try to find out exactly how hard it is likely to be to sell a franchise. With larger companies theyll be a more liquid franchise market than with others. However, the success of your business will also have a material impact on how easy it will be to sell and how much it will sell for.

What earnings are other franchisors making with your company?

Although its true that other franchisees success and failure doesnt necessarily reflect how well you will do, it can act as a yardstick. With franchising, you have to look at how well the business model has worked in the past. After all, that is what youre paying for.

Also, you should contact every franchise that is referenced as an example of the companys franchising model working well. Its always best to double check if the information they provide is valid, and also if the franchisee interprets everything the same way as the sales literature suggests.

Can you provide examples of franchisees that have failed, and tell me why?

Its to be expected that some franchisees will fail. Franchisees shouldnt expect the franchising opportunity to be perfect, or for every franchisee to be immune from problems. However, as a franchisee, it can be in your best interest to find out the reasons why the franchising opportunity hasnt worked out for some. You could even consider speaking with the failed franchisee and finding out the reason why they think they failed.

When doing this you should be looking out for ways that you can avoid their mistakes. You should also be vigilant in identifying whether the reason for failure appears to be the fault of the franchising company or the franchisee.

Its also definitely worth finding out what percentage of franchisees fail. If the number is higher than other franchising opportunities in the same sector, then you should try to think of reasons why this may be.

About the Author:
CityLocal has exciting internet franchise opportunities available for its local business directory. www.citylocal.co.uk and www.citylocal.ie



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