4 questions to ask when evaluating a franchise opportunity

On Behalf of | Jun 12, 2020 | Franchise Law

For many, opening a franchise location can be a great business opportunity. However, prospective franchisees need to carefully evaluate these new opportunities to determine if they really live up to that promise.

What is the market’s potential?

First and foremost, you should evaluate whether the market is a good fit for that franchise. For example, opening a franchise location of an ice cream shop in a colder climate shortens your busy season. In other cases, there may be several similar businesses in the area that would compete. These factors can limit your profits. On the other hand, an area without direct competitors could be a great opportunity.

What royalties, marketing fees and other charges are required?

You should consider franchiser charges when evaluating this new opportunity. These fees can include royalties and advertising fees, but some companies may also charge franchisees an ongoing fee for software usage and other ongoing franchise support. Be sure to compare these fees to other franchises to determine whether these fees are fair. You may also want to consider working with a franchise law attorney to evaluate the terms of the franchise agreement.

What training and support does the franchiser offer?

From management training to technical support, franchisers may offer a wide variety of support options that help their franchisees open a new location and maintain that business. The training and support that you receive can be key in successfully opening your franchise location.

How will disagreements be resolved?

While no business owner wants to expect a fight, it is essential to know how you can address your concerns or difficulties in the franchise relationship. You should also take care to research the franchiser’s past conflicts with franchisees. This knowledge can familiarize you with the company’s conflict resolution methods as well as help you determine whether the franchiser resolves those conflicts in a way that would satisfy you.

By effectively evaluating a franchise opportunity, you can choose a franchiser that offers you the support you need to make this business a success.