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Qustions To Ask If You Are Considering A Franchise.

Buying a franchise may be a good thing but do not be carried away by what may well turn out to be empty promises.

Many people see a franchise as a relatively easy way to start a business.

After all, the franchise company will probably provide full training, find and equip suitable premises, market the new outlet, etc., so the business will get off to a flying start. But hold on! Have you read the small print? If so, do you actually understand it? Have you sought, not only the views of a business advisor, but the legal opinions of solicitor?

A few years ago, I presented a seminar at the National Exhibition Centre on cash flow management as part of the Grow Your Own Business exhibitioon, which ran alongside the Franchise Exhibition. Of course, there were some excellent opportunities, and, because of that they were very expensive. Others, one has to conclude, would be here today and gone tomorrow, and now by 2011, that has proved to be the case. There are more than a few exhibiting in 2009, which no longer exist. Other franchises on offer were so basic that a reasonably switched on entrepreneur could easily have started up for c.£5,000 instead of investing £25,000 in a franchise which did exactly the same thing.

I have been looking at some adverts, that significantly do not state the company name, temptingly suggesting that one could earn (and I quote) £1,000+ a day, and no selling involved. Another is perhaps more conservative – only £5,000 per month part time! Really? If it is that easy, why isnt everyone doing it?

A franchise may be a good thing. All I am saying is, dont be carried away by what may well turn out to be empty promises.

1. Is the franchise part of the British Franchise Association (www.thebfa.org)? If not, why not?

2. Ask the franchisor to put you in touch with at least three franshisees, who have been trading for a minimum of three years.

3. Find out exactly the terms of purchase of the franchise, and the ongoing costs, e.g. annual fee? A percentage of the profits?

4. Are you locked in to purchasing all your supplies from the franchisor?

5. What does the training consist of? How long is it? Is there ongoing training?

6. If you havent the finances in place, discuss the franchise in principle with the bank. What is their opinion of that franchise? Do they have any positive or negative feedback? Remember the banks have resources in depth on franchise finance.

7. Seek legal opinion of the franchise agreement. It may well be a very tight contract, without a get-out clause, which could take a long time to negate.

Having done all that, do your own market research to ascertain the potential demand for the product or service.

Finally, always remember that if it seems too good to be true – it probably is!

Robert Snaith, RS Business Training

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