Are you planning to buy a Franchise? If so, you might have serious concerns about what could go wrong.
Undoubtedly, it’s a big investment, so you’re expected to do your homework to make sure you know what you can about the franchise business and the brand you want.
So lets get straight into it, every franchise company has a public record known as a Franchise Disclosure Document (FDD), but it is rarely read by other franchisers. It provides a variety of information about the franchise business model and current financial situations. You will get to know more insights by conversing with current and former franchise owners what the FDD does not respond.
Before you sign up with a franchise, here are the top aspects you’ll want to watch out for:
1) Miss-understanding of Franchise’s Business Model:
Generally, how well does the chain do? Your greatest chances of success are to enter a network where the pattern has been tested, and sales per unit is rising. The FDD gives you a lot of clues about the stability of a franchise network.
You’ll be able to see, for example, how many units have been sold in recent years. Ideally, there’s no such problem as thriving units may be resold to new buyers if the current franchisee decides to. There are several suspensions which are a big red flag.
Check for litigation as well, and read up on every one you notice. They can be frivolous, or they can expose big problems that could impact your company
2) Market Good-fit:
Often a franchise chain may be well, but with your unique case it is probably not going to be a safe investment. Make sure to look at all the industry rivals for your style of company and other brand units you prefer. How many sites are available in town now, and how many more are planned?
Early success often may see franchisers spreading more quickly into a market, or the popularity attracts new rivals. The perfect example is the Domino’s owner who sees the opportunity on their own corner of Pizza Hut or Sal’s Pizza. Earnings per unit are fast dropping.
Franchise owners are fond of showing off their most productive units. Bear in mind that the case might be different from theirs.
3) Too Many Rules to Follow:
You know when you purchase a franchise you are getting a complete done deal. However, you’ll be obliged to use the nationwide promotional strategy of certain franchise schemes, even though you believe it’s not a match for your particular audience. Or you may have to buy all of your franchisor’s products, down to the napkins.
Unless you are an ambitious, innovative sort, this may be too much opposite for your style of management. You would want to look at a franchise that respects creativity from the franchisee and is more flexible about how you implement their idea.
Get Professional Advisory Before putting your Steps In
If you want to pick the right choice to match your desires, there is a lot to learn about a franchise. With well over one thousand companies now offering franchise packages, comparing deals and finding out the right one can be boggling.
This is why a lot of businessmen are consulting with professional consultants before making a purchase. Thousands of major franchise brands are common to experts and will help you understand the gaps between different models.
At CredSol Business Services, we are well aware for the potential difficulties in the franchising procedures, such as the pace at which a franchiser will collapse into financial difficulty due to poor business structure, lack of cost control, inadequate management or inefficient systems.
At CredSol Business Services, we are well aware for the potential difficulties in the franchising procedures, such as the pace at which a franchiser will collapse into financial difficulty due to poor business structure, lack of cost control, inadequate management or inefficient systems.
By embracing a ‘ whole-of-business ‘ strategy that incorporates franchisers and franchisees ‘ market and regulatory needs, we are providing strategies that achieve quicker, more sustainable growth and better business results for both stakeholders.
Looking for professional Advisory? contact us at 0204 273 376 (Credsol) or Email: info@credsol.co.nz
