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| Points to Consider when Purchasing a Franchise 6 Important Points Author: Franchise Finder Team |
| Purchasing a franchise is an investment in your own business and therefore it carries a risk, like any other investment. In this newsletter, we'll look at the following factors that you should consider before purchasing a franchise. |
| Demand Is there a demand for the products or services offered by the franchise? Is there a demand in your area or in the area that you plan to operate the franchise? Research this carefully by talking to people in the area, doing surveys in the area and looking at whether there are similar businesses in the area and how many. If there are no other similar businesses in your area it doesn't necesarily mean that there isn't a demand, it may just mean that no one has caught onto the idea or that no one has the means or technology to run that type of business in your area. |
| Training & Support This is one of the most important points to consider. Ask the franchisor what type of training is given and for how long? Is it hands-on learning, lectures, computer -based learning or a mixture of various types? Does the franchisor have formal training or a degree in this type of business? Will you as the potential franchisee be able to run the franchise successfully without any formal training? Or should you preferrably have a background in this particular business area? What about ongoing support, is this offered? Is their someone that deals purely with support issues? Or will you have to wait hours or days to get some assistance? Make sure these points are covered in your franchise agreement. |
| Competition Is this market saturated? Or is there still room for growth? How does the franchise measure up to other businesses in the area offering a similar product or service? What does the franchise offer that is unique or different to that of the competition? If there are similar businesses in the area it is important that you can offer something "more!" |
| Your Ability to Operate the Business Before you buy a franchise, ask yourself the question - If the franchisor and the franchise system fails, will I still be able to operate this business under a new name, without the support from a franchisor? Having said that, it must be remembered that franchises are less likely to fail than a stand alone business. |
| Name Association Buying a franchise usually means instant recognition and an association with particular products and/or services. So before purchasing a franchise, ask yourself how widely recognized the franchise is? ie. throughout South Africa or just within certain provinces or not at all (it could be new). Ask the franchisor how long it has been operating, how many franchises are there in South Africa and in which provinces? Find out whether the products or services offered are professional and of good quality. |
| Franchisor's Experience Is the franchisor new to franchising? You need to be confident in their ability to run, manage and grow a franchise system. A person may be new to franchising however they may be an exceptional business person with a large amount of experience in running their own business for a number of years beforehand. For franchisors who are new to franchising and are also new to running a business, be sure to ask as many questions as possible and have a thorough franchise agreement in place. |