franchising aspects Jun, 18 2010

Rely on research for right choice

Whatever business an investor decides to opt for, prior research and cross checking is quite essential to ensure that your hard-earned money is not wasted. A little ignorance or carelessness can spoil all chances of franchise success. Read how

By Ramanjit Kaur
Feature Writer
Rely on research for right choice

Franchisors often use glossy brochures and slick presentations to persuade aspiring entrepreneurs take up their franchise. Aspirants, who are novice in the franchise arena, get carried away by the dazzling tricks of franchisors quite easily. To avoid such unfavourable situations, franchise research is a must for aspiring entrepreneurs. It will help them in safeguarding their interests against frauds and future conflicts. However, before initiating the research, an appropriate strategy needs to be developed for encouraging outcome. To start with, here are three basic steps for beginners.

Analyse Franchise Disclosure Document (FDD): It is the preliminary step to get started with franchise research, as details are provided by the franchisor himself. Details about the franchise and its offerings mentioned in the FDD are the best source to cross check the authenticity and credibility of the franchisor. The thorough analysis of FDD is also helpful in clarifying ambiguous clauses or provisions.

Watch out for probable problems: Having analysed FDD, aspiring entrepreneurs can fix up a meeting with the franchisor to discuss and solve queries and find out solutions to the same. The prospective franchisees should also consider certain other factors such as:

Credibility of the brand: An aspiring franchisee spends ample time and money in zeroing in on a brand that he wants to get associated with. Therefore, an aspirant needs to check the credibility of the brand and the products and services provided by it. He needs to find out:

  • Durability of the brand
  • Brand positioning
  • Need and demand of the brand

Exclusivity of the franchise territory: To avoid area conflicts, the franchisee should clarify his doubts, if any, related to exclusivity of the franchise territory. He should know whether other franchisee would be given rights to open a franchised outlet in that particular territory or not. This might lead to conflict and in-house competition in future.

Pseudo support and training promises: Being an aspiring entrepreneur, you have the right to ask your franchisor or his staff about the kind of support and training that will be provided. You can check for how long you can leverage the free support and training to establish the franchise business. To make the deal more airtight, you can ask your franchisor what if he fails to fulfill the commitments or obligations. Will you be compensated for that and if yes, then how?

Hidden costs: Besides franchise fee and royalty, there are other hidden costs that may create disputes between the franchisor and the franchisees. For instance, a franchisor may ask the franchisees to put in extra investments on training, marketing or buying merchandise for the franchised outlet.

Marketing of the brand: A franchisor is always expected to come up with some innovative marketing ideas like sales, discount schemes, special offers, brand endorsements and so on from time-to-time to promote the brand. If the franchisor is not doing it even after having committed it earlier, it can be a cause of conflict.

Interact with other franchisees

After grilling the franchisor thoroughly, the last step is to contact previous and present franchisees of the company. This is the best way to dig out all the information about the company. Only a present or previous franchisee can explain you clearly the positive or negative aspects of a franchise. Apart from their experience of joining hands with the brand, you can ask them to share their know-how of running the franchise business.

These three steps of conducting franchise research, if followed carefully, will help you in finding a fruitful and profitable franchise business for yourself.

Related: Cost Effective Business Proposal

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