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Chapter 4

The document provides questions to ask the franchisor about the franchise opportunity including questions about the franchisor's ownership and management, costs associated with purchasing and operating the franchise, required training and support provided by the franchisor, products and services offered, recommended advertising and marketing, and operations oversight. Key areas of inquiry include total investment costs, ongoing financial obligations, training curriculum and support, new product introduction process, cooperative advertising programs, and field staff roles and responsibilities.

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Kim Ravanzo
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
108 views

Chapter 4

The document provides questions to ask the franchisor about the franchise opportunity including questions about the franchisor's ownership and management, costs associated with purchasing and operating the franchise, required training and support provided by the franchisor, products and services offered, recommended advertising and marketing, and operations oversight. Key areas of inquiry include total investment costs, ongoing financial obligations, training curriculum and support, new product introduction process, cooperative advertising programs, and field staff roles and responsibilities.

Uploaded by

Kim Ravanzo
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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EVALUATING A FRANCHISE-

INTERVIEWING BOTH SIDES

1. What should I ask the franchisor?


2. What should I ask the franchisees?
3. What questions should I ask myself before
buying a franchise?
4. What are the keys to franchise success?
WHAT
WHAT SHOULD
SHOULD II ASK
ASK THE
THE
FRANCHISOR?
FRANCHISOR?

ABOUT
ABOUT THE
THE FRANCHISOR:
FRANCHISOR:

• Who owns the trademarks, service marks,


• Does the franchisor staff attend seminars
etc., and are they federally registered?
on franchising and management?
• Are there any disputes pending or
• Do field consultants offer help and
threatened against the trademarks?
guidance or merely act in a regulatory role?
• Has the franchisor complied with the FTC
• How many franchises are expected to be
and state disclosure laws?
added each year?
• Are any senior management or key
• Where will they be located?
personnel leaving the system?
• What is the success rate of existing
• Does this company compete with the
franchises?
franchisees in the marketplace?
• What method is used to protect franchisees
• Will the franchisor finance any of the
from poorly performing franchises?
costs?
• Is there a franchise owners association? •
• Is the franchisor willing to negotiate the
Is there a franchise advisory council?
terms of the franchise?
ABOUT
ABOUT COSTS:
COSTS:

What is the total investment required to own a franchise?


• franchise fee
• furniture, fixtures and equipment
• leasehold improvements
• lease deposits
• other deposits
• franchise training
• travel expense
• supplies
• advertising and brochures
• grand-opening advertising
• inventory
• pre-opening staff costs
• working capital until breakeven
• working capital – living expenses
• other
What are the continued financial costs, the basis used for
calculation, method of payment and frequency of payment?:

• royalties

• advertising
Must the franchisee purchase products or services from the
franchisor?:

• Does the franchisor earn income on purchases?

• How much does the franchisor earn?

• How are the products distributed?

• How long does it take for the orders to be filled?

• What other initial or continuing services does the franchisor


provide? What do these cost?
ABOUT
ABOUT CONSUMER
CONSUMER RESEARCH
RESEARCH AND
AND
MARKETING:
MARKETING:

• What type of consumer research has the company conducted?

• What were the results?

• Has the franchisor conducted any market studies on the territory to ensure
that it can support a franchise?

• What are the demographics required to support a franchise?

• What are the traffic counts required to support a franchise?


ABOUT
ABOUT
TRAINING:
TRAINING:

• What are the location, duration and additional costs of initial training?

• Who must attend the training?

• What is the cost of additional staff attending training?

• What is the training curriculum?

• Who conducts the training and what are their backgrounds?

• Who pays for transportation, room and living expenses?

• Does the franchisor provide training materials for training new staff in addition to the
operations manuals?

• Does the franchisor provide hands-on assistance during the pre-opening, grand
opening and initial period? Of what type, duration and cost?
ABOUT
ABOUT PRODUCTS
PRODUCTS AND
AND SERVICES:
SERVICES:

• Are there any new products or services under consideration for addition to the
franchise?

• When are they going to be introduced?

• What is the estimated additional cost for adding the new products or services?

• Are there any restrictions on the distribution or sale of the product?

• Is there a guarantee or warranty program? How is it administered and what is the


cost?

• Is there a minimum that must be purchased?


ABOUT
ABOUT ADVERTISING
ADVERTISING AND
AND
MARKETING:
MARKETING:

• What type of consumer advertising does the company recommend?

• What types of cooperative advertising programs are being used?

• What percentage of sales is recommended or required for advertising or marketing?

• How do the franchisees obtain their sales leads or customers?

• What is the franchisor’s national/regional advertising program and budget?

• What portion of the national/regional advertising contribution is used for


administrative/corporate/agency expenses and fees?

• What are the primary advertising/marketing vehicles?

• What is the grand opening advertising program and cost?


ABOUT
ABOUT OPERATIONS:
OPERATIONS:

• What are the roles and responsibilities of the field staff?

• How many locations does each franchise consultant work?

• What is the background of the franchise consultant I will be working with? Can I meet
that person before purchasing the franchise?

• How often does the field staff visit a franchisee’s location?

• What is the additional cost of field services if the franchisee requires it?

• Exactly what kind of assistance is given?

• What kind of supervision or quality control is there?

• What, if any, is the charge for assistance?

• What kind of business management systems are provided to boost sales and profits?

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