There is no question that there are clear guidelines to consider when shopping for a franchise business opportunity. There are personal guidelines for you to consider at your end and there are certain elements you are looking for in the franchisor too.

Your own personal checklist might look like this:

• I have enough money or can borrow enough money to meet upfront franchise fees and ongoing fees for at least 18 months
• The day to day operations in this franchise are in sync with how I’d like to spend my time
• The day to day management responsibilities are harmonious with my strengths and talents and skills
• The person at the helm of the franchise opportunity is of strong reputation and likeability
• The culture of the franchise opportunity is in sync with my own values and style
• I believe that the future of the franchise opportunity combines vision and practicality
• The structure of the organization, (public, non public, or soon to go public) is one I find acceptable
• I know how many hours I’m willing to invest weekly in the business

Of course there is a checklist regarding the franchisor, too:

• The franchise organisation is financially healthy
• The litigation history is acceptable and has been explained satisfactorily
• The organization has had consistent franchise growth
• Management shows an openness to new ideas
• Earnings claims are available and satisfactory, or if not available, franchisees are willing to help you to understand the financial picture
• Franchisor requires franchisees to work the business full time or not. In either case, that meets with my criteria
• Franchisor is clear on its support of multi-unit opportunities or not. In either case, that meets with my long term goals for the business

As part of your Due Diligence, you should also:

• Review the franchise’s offerings
• Interview a varied group of franchisees with a list of pre-designed questions
• Visit a local franchise unit or two
• Visit the organization’s headquarters and meet with key management

Whilst I fully acknowledge the necessity of researching carefully and asking all the right questions at some point a decision needs to be made and the decision, in my mind, comes down to feelings

• Does this opportunity feel like the right “fit” for me?
• Do I feel comfortable conversing with management and fellow franchisees?
• Can I see myself becoming a member of this franchise family? A leader within the organisation?
• Can I see myself having fun while managing this business?
• Do I see a values and personality fit with the key players?
• Do I see myself growing side by side with this franchise?
• Are my instincts telling me this is the right business organisation for me?

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You have reached Gardner Riley. We are internationally based specialist business consultants. Our key sector is franchising and business development through that methodology whereby we work privately with Shareholders and Directors; franchisees and franchisors alike to change the way companies can expand.

Based on our extensive industry experience we advise businesses on whether their concept, format and know how is suitable for development.,/p.

The Business Model

Writing a solid business model is the vital first step in getting your venture on the path to success. If you are having trouble writing your model and think you may have issues achieving your goals, then you need to talk to us. We will work with you to write a plan which is robust, sensible and achievable. Your tailor-made plan will include the following topics:

• Your mission, objective and keys to success
• Company ownership and history
• Products and services
• Market analysis
• Strategy and implementation
• Financial plan
• Funding

As well as writing your plan, we will also be happy to help you to acquire funding. Once the plan is complete, we work with you to achieve all your goals in the timeframe that you have set, giving you focus, confidence and a sounding board – see http://www.gardner-riley.com

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1. What law governs the franchise agreement? Many successful franchises in the UK are not UK companies the law applicable for an international franchise may well be another jurisdiction.
2. What happens if the franchisee dies? Is there provision in the franchise agreement for the franchisor to provide staff to run the business to keep the show on the road?
3. Is there a renewal option when the franchise agreement ends? If there is are you happy to commit to sign a franchise agreement in say, 10 years time, having no opportunity to see the new agreement? What are the terms?
4. Can you sell the business? Can the franchisor veto your purchaser?
5. When the franchise agreement is terminated is there a non compete clause? For how long?
6. If the franchise agreement is terminated and the premises is yours, how much will it cost to de-brand?
7. Is the training and system manual up to date? When was it last updated?
8. Is there an advertising fee payable? Can it be justified? Is there marketing spend on the brand?
9. Is there a management services fee? How is it calculated?
10. Does the franchisee have to inform the franchisor of any improvements he has made to the system?
11. Is the franchisor the owner of the trademark? And if not will he provide a licence to the franchisee for the use of any trademarks and intellectual property?
12. Who will own the premises? Will the franchisor provide any advice in relation to location and premises? Is this provided for in the franchise agreement?
13. How long has the franchisor been carrying on business? How many company owned outlets?
14. If the franchisor is supplying goods is there a credit limit? Will a minimum stock of products be imposed? Is a vehicle required? Will it have to be branded?
15. What books and records will the franchisee have to supply to franchisor?
16. Will a confidentiality agreement be required?
17. Who will pay for initial and ongoing training?
18. Is there a territory? Is it exclusive? Is it stipulated in the franchise agreement?
19. How long will the franchise agreement last? Is it compliant with competition law requirements?
20. Is training provided for staff? Is it ongoing?
21. Is more than 10% of the initial fee for use of the name and trademark? Can this be justified?
22. What initial stock will be needed? Will the franchisee have to purchase equipment, stationery from the franchisor?
23. What ongoing obligations has the franchisor as per the franchise agreement in relation to problem solving, management, finance and marketing, provision of staff in an emergency, research and development and maintaining and improving the manual?
24. Will franchisee be required to advertise locally?
25. Does the franchisor have the right to communicate with the franchisee’s customers?
26. Has the franchisor the legal right to purchase the franchise from the franchisee? On what terms? Is that in the franchise agreement?
27. Is the franchisor entitled to appoint a manager if the franchisee dies or is incapacitated?
28. Who is entitled to terminate the franchise agreement? On what terms? What events will bring this about?
29. What will happen when a dispute arises? Is arbitration provided for in the franchise agreement? Litigation?
30. Does the franchisee have to enter into any restrictive covenants in the franchise agreement?

When looking at a franchise agreement with a view to buying either a new franchise or an existing franchise, a close perusal of the franchise agreement with these questions foremost in your mind is a good starting point. You will need to engage a solicitor before signing any franchise agreement but these questions may assist you in deciding whether to go that far or not.

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Read our guide below to see if you are making the right decision.

1. Which Franchise?

Usually prospective franchisees come to us with a particular franchise in mind. The first thing we always ask is – why select that one? There are lots of franchisors who would no doubt like to have you as a franchisee. Before you buy a franchise you are in a real position of power. If you decide that you want to purchase a franchise repairing car dents or selling promotional merchandise, check out all franchisors and compare their schemes. Whatever the franchisor says, they rarely sell a franchise very quickly, so some extra research time spent before you buy could save you a lot more than time in the long run.

2. Do Your Homework

Once you have narrowed down your choice of franchisor, you should do your homework thoroughly. In particular you should ask to speak to other franchisees of the business who are up and running and see whether they are happy with the way things are going and the level of support they get from the franchisor. Also check out potential demand in the territory you have been offered. If it is already saturated with products or services similar to the ones you will be selling forget it or ask for another territory. Attend some business networking meetings and discuss your idea with people already in business. Often friends and family are not the best people to advise you so some independent advice from someone who does not know you well could be invaluable.

3. Do The Figures Add Up?

Ask your accountant to check out the projected figures to see if they are realistic. If there is insufficient profit margin once you have paid the fees to the franchisor then regardless of the effort you put in you are not likely to have a successful business. Also check with existing franchisees that the projected figures are achievable. You need to be confident that you can make a living from the franchise.

4. Negotiate On Price

Once you have done your homework and are sure that you want to go ahead we can give you advice on how to secure the best deal on the terms from the Franchisor. Some franchisors will say “take it or leave it” but others , in particular more recently established Franchisors may be open to negotiate on the price. They may be open to you paying the initial fee by instalments or may even make a reduction in the initial fee.

5. Negotiate The Territory

You might also be able to increase the size of your territory by negotiation in order to maximise the potential profits of the business.

6. Take Legal Advice Before It Is Too Late

Many of the enquiries we get are from current franchisees who were not advised when they took on the franchise and are now desperately seeking to leave it. With our advice before you take on a franchise we can save you both time and expense. Quite often our advice will more than pay for itself by better terms negotiated or a risky franchise avoided. We are keen that you don’t make a big mistake.

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