Franchising has become more popular and commonplace with every passing year. According to the Small Business Administration (SBA), franchise businesses provide more than 8 million jobs in the United States. The strength in this sector is an outgrowth of the many advantages that are associated with owning a franchise such as:  

The question is if franchising is right for you? One of the first decisions that you have to make is selecting a business concept that will fit your comfort zone. Once this is done, you must know how to evaluate a franchise and determine if it is right for you. 

 

At the VR Franchise Showcase, we have developed some key guidelines that all potential franchisees should look at before purchasing a franchise business.  

 

Does the Franchise Offer Training and Operational Support?  

 

This is one of the most important assets that a franchise has to offer. A franchisee will be better equipped to overcome the obstacles that block the path of business success with the proper knowledge that’s gained in training classes.  

 

Any classroom or on-site training should be at least one week in length with the materials covering not only the daily aspects of the business but other topics such as:  

You will more likely run a successful business with the more extensive that the training is.  

 

The franchise should be available by phone to answer your questions as they come up as well as stay in touch with you on a regular basis. They should have a system in place to periodically evaluate every franchisee and offer advice on better improving their operation.  

 

Are Comprehensive Promotional Packages Available with the Franchise?

Does the franchise make banners, flyers, door hangers, posters and advertisements available for your grand opening day as well as other holidays throughout the year? Good franchise businesses will send their representatives to assist you in store set-up and grand opening promotions. The first few days are very hectic and confusing; therefore, a business representative should be there to assist you.  

 

How are the Franchise Fees?

It’s imperative to evaluate franchise fees very carefully, and be suspect of fees that appear to be too low. Why should you question a franchise that has low franchise fees? Because this means that the franchise cannot possibly provide the support necessary to assist its franchise owners.  

 

Legitimate franchise companies have a long-term interest in your continued success, where as some of the less scrupulous franchise businesses outright avoid disclosure laws that are associated with franchising. They are only there for the short term.  

 

Does the Franchise Have an UFOC?

The federal government as well as most state governments has rules and regulations regarding the content of the offering documents. The format for the Uniform Franchising Offering Circular (UFOC) is embraced by every state. The UFOC and other offering documents include the following:  

According to federal law, the offering documents must be given to the prospective franchisee at the first meeting between the franchisor and franchisee where the purchase of a franchise is seriously discussed. Furthermore, franchisors cannot accept funds until you have had ten working days to review their offering circular. Stay clear of franchises that want your money at the first meeting.  

 

How Long has the Franchise been in Business?

This is one of the most crucial factors when evaluating any franchise by seeing how many years that they have been in business. Avoid franchises that have low success rates or ones that are just a couple of years old with no real track record. On the whole, most franchises have a higher success rate than independent businesses.  

 

What is the Growth Rate of the Franchise?

A healthy franchise will grow in terms of the number of units that it opens every year. Don’t look at just its percentage growth, but the actual number of units that are opened. Small franchises tend to have much higher growth rates than larger ones, but in reality are opening units at a much slower rate – this can be a higher risk.  

 

How Profitable is the Franchise Corporate Office?

This is the financial soul of the franchise. A financially strong and profitable corporate office directly affects the individual franchisees. You will inevitably receive more support, training and assistance from franchisees that are making money.  

 

How Large is the Franchise Regionally and Nationally?

Although size is relative, you should look for a franchise that is large enough to ensure its franchisees benefits from a large network base. A franchise with a large network can provide economic support in areas such as supplies and advertising. Chances are that the franchise is of network proportions if you immediately recognize the logo of the franchise prior to doing any background research.  

 

Will the Franchise Assist You with Site Selection?

An important element in the success of a franchise business is a good location that will give you access to large numbers of your target market group and increase the store foot traffic. Look for franchises that offer on-site assistance and/or approval of each franchise site for its franchise owners.  

 

Does the Franchise Grant Territorial Exclusivity?

Most franchise businesses grant some type of assurance that competing facilities will not be placed in the exclusive trade area of your franchise. This is determined by demographics, population density and the number of clients that are required to support a franchised outlet.  

 

Your exclusive area should be large enough to allow the business to prosper yet small enough so as not to leave space for competitors to enter.  

 

Researching a Franchise

One of the simplest ways to obtain information is by calling individual franchisees and asking them some simple yet targeted questions. You’ll be surprised at how many franchisees will answer your questions.