How to check a franchise

After several franchise options that best match expectations and capabilities have been selected, it's essential to evaluate and choose those that will be most effective for the specific entrepreneur. Franchise verification should be comprehensive and thorough because exiting franchising relationships and recovering franchise fees are usually extremely difficult for franchisees. It's best to assess all risks "onshore" and enter into relationships with the franchisor who has provided accurate, complete, and reliable information about their franchise, which is maximally suitable for the candidate.

How to evaluate? Let's highlight the following sources of information:

• Communication with the franchisor: Before deciding to acquire a franchise, it's essential to meet with the franchisor at their location. This will allow the entrepreneur to determine how comfortable it will be for them to communicate with representatives of this company, whether reality corresponds to the stated status and level of development, and whether the company has enough resources to provide the promised assistance and support.

• Communication with franchisees: It's necessary to find contacts of current and former franchisees of the network and meet with them. Those who already work with this franchisor can tell the whole truth about working in the network. It's worth noting that in actively developing networks, there will always be closed points, and conscientious franchisors do not hide the contacts of their current franchisees from candidates. It's not worth abusing the time of current entrepreneurs, but they are usually ready to allocate 10-15 minutes for communication. What can be found out from current franchisees:

  • Availability of training programs;
  • Assistance in opening;
  • Regular support;
  • Effectiveness of marketing programs;
  • Scale savings potential;
  • Assessment of franchisor-franchisee relationships;
  • Compliance of actual expenses with forecasts;
  • Compliance of actual profitability and turnover with forecasts;
  • Reasons for franchisee dissatisfaction.

• Searching for information in public sources: Use any open information to learn as much as possible about the franchisor. Everything should be put into play – information from registering and tax authorities, data on participation in legal proceedings, existing enforcement proceedings, company history, profiles of owners and top managers, partnership histories, etc.

• Consultants: Franchising consultants and associations can not only search but also verify the information found.

What to check? Let's highlight the main questions for research: