Selecting the best franchises for sale requires a significant amount of effort and investment of time and energy. A franchise is an existing, proven business that can be purchased and operated as an independent business. In return for the use of the business trademarks, products, and techniques, the franchisee pays the parent corporation an initial investment and a percentage of gross sales.
The first item to review when looking at the various franchises for sale is the structure of the parent corporation. Determine if the business is publicly traded, and investigate the business experience of the directors and officers. Find out if any of the directors have declared bankruptcy or been convicted of a criminal offense. Look at the length of time the company has been in business and how many of those years it has been offering franchises.
Talk with the existing franchisees to determine how business operators are selected and the current relationship quality. Ask about the level of service the parent company provides, and find out how the parent company monitors sales and performance. Discuss the level of input franchisees have into marketing strategies, new product development, and other advertising issues. A matrix or table is a great way to keep track and evaluate all the different issues when looking at franchises for sale.
Location is critical to the success of any business. Ask if the franchise includes exclusive rights to a specific geographic area. Determine how many franchises for sale are located in the same areas. Find out if there is a limit to the number of stores that can be set up in close proximity to each other. Ask if the franchisee is expected to pay a site development fee during construction of the new location. When reviewing the different location options, investigate the maintenance costs for the location and explore the delivery and storage space.
Look at the product or service that the franchise will offer and determine if there is a need for this product in the target market. Take a walk around the proposed location to determine who the competition would be and to evaluate the level of pedestrian and car traffic. Determine what stores are the big draws and see if those customers would be interested in your product or service.
Investigate the legal status of the company and products to determine if there are any current or ongoing lawsuits. Review the information regarding these suits and ask the company to provide an explanation of the suits and what the potential damages might be. Investigate the trademarks and patents held to ensure there is no question of rightful ownership. Review the financial statements for the parent company for the past five to eight years and determine what the current sales and sales trends are in the different markets. Make a selection based on the company that can provide both current and future growth.
