Franchise Article: Key Strategies to Investigating Franchise

peyman@mohajerian.com (Mohajerian Inc.) — Sat, 14 Jan 2006 16:38:50 -0700

Key Strategies of Investigating a Potential Franchise

Any potential franchisee will tell you, choosing the right franchise system for you can be a grueling and tedious process. How do you really know when a franchise system is legit? How can you really understand the franchise system and its processes? How can you make sense of the overwhelmingly large UFOC you just received? The answer to these questions lies in how you investigate a franchise system. There are many strategies, some may or may not bring any real value to decision-making. With ten years of successful experience in guiding business owners to the right franchise system, Mohajerian Law Corp has this one piece of advice: Conduct thorough interviews of current and past franchisees.

Who better to explain the franchises system than those who are knee-deep in the trenches? All franchisees have been through the same process, faced with a very complex decision. They likely carried the same fears, anxiousness, and overwhelmed feelings at the seemingly jumbled information presented in the franchise systems UFOC. More importantly, they have been through the rigors of the entire franchise system. From the initial selection of the franchise system as a business investment to the daily demands of operations; this knowledge places them in a select group of individuals who can provide you with exceptional access into the system itself.

Interviewing current and past franchisees can be the perfect way to evaluate the true nature of a franchise system from how they support their franchisees to the requirements and obligations for which you will be accountable.

Considerations to Make Before Interviewing

1. Acquaint yourself with the dynamics of the franchisor/franchisee relationship. Experienced legal counsel can assist you in this understanding.
2. It is important to conduct more than one interview, several if possible, to gain an overview of what a group of franchisees has to say about the franchise system. It is unwise to rely on the stories or input of one or two franchisees.
3. When interviewing franchisees of the system make sure to include current and past franchisees. As well, consideration should be made to include those with an established, long-term relationship and new franchisees for both current and past.

The ultimate goal of the interview process is to have a good understanding of how the group feels towards the opportunity, its results, the franchise system itself, and the franchisor.

Important Topics to Cover

Training and Support: For many new franchisees the venture of opportunity can often be overwhelming. The industry and its processes may be entirely new or the franchisee may lack some skills and knowledge. Ensuring a franchise system that provides adequate training and support to all franchisees, at all phases of the business, and is often critical to the success or failure of your business.
Marketing Programs and/or Sales Requirements: The manner in which a franchise system provides marketing support, materials, and the requirements that it holds its franchisees to in regards to sales are very important topics to cover. A franchise system that provides high levels of support and materials may be a better fit for a new franchisee and vice versa.
Investment and Earnings: A franchise system UFOC will provide information regarding the range of necessary capital for successful operation however, it is always a good idea to cover this topic in your interviews. Franchisees can shed some light on how they opened, what range of capital they found to be successful, is there any cost-saving advice they can give you, and the earnings they have seen given the investment made. Of course, this will not indicate or guarantee your results. However, if a majority of the group is not seeing any return on investment, at all stages in the business, this would be an issue.
Possible Purchase Power: Most franchise systems have purchasing programs, which can provide a considerable competitive advantage in costs compared to other establishments. These purchasing programs rely on the quantity, bulk buys similar to those in a co-operative. The potential purchasing power of the franchise system has many advantages for the franchisee.

Truly understanding the franchise system before making the critical decision to invest can be accomplished with a little effort on your part and the advice of experienced franchise counsel. While any investigation strategy can not guarantee your success in a franchise system Mohajerian Law Corp. believes the more knowledge you carry into the decision-making process, the more likely you are to succeed in making the right decision for you.

Franchise Law Team - Mohajerian Law Corp.
www.mohajerianlaw.com

Franchise Article: Franchise Basics

peyman@mohajerian.com (Mohajerian Inc.) — Tue, 10 Jan 2006 19:54:55 -0700

WHAT IS A FRANCHISE: FRANCHISE BASICS

Franchising is a specific manner of business, in which companies attempt to expand their market share more rapidly and less expensively than by other means. There are three basic types of franchises:

Distributorships which grant the right to sell the company's products.

Trademark and brand name licensing allows the licensees to use the company's trademark or brand in operating their own business.

Business franchises which allows the franchisee the right to use their trademarks, products, and business systems.

Business franchises usually have an initial fee or investment for the rights to sell its goods and services and/or use its business systems. After the initial investment, franchisees are typically required to pay a percentage of their gross profits to the franchisor during the length of the franchise agreement.

Purchasing the rights mentioned above, usually entitles the franchisee to also recieve initial training and on-going support. The franchisee has responsibilities to the franchisor in order to retain the rights above. These obligations can include:

Ability to meet established quality requirements for products and services sold.
Adhere to restrictions on how and what you can sell while operating within the agreement.
Meet requirements for location and site appearance.

While this list is not exhaustive, it is important to note that franchisees have a great obligation to the franchising company to adhere to the specifications and requirements of the franchise agreement.

Often times the obligations of the franchisee are well worth it, as they often carry an advantage over their non-franchised competitors. These advantages can include: a well-recognized brand, product, or service; proven business systems training; and uniform business systems for ease of management with multi-units. These advantages are integral to the statistically higher success of franchised businesses over traditional start-ups.

Franchise Law Team - Mohajerian Law Corp.
www.mohajerianlaw.com
Franchise Law Team - Mohajerian Law Corp.

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Franchise Article: Key Strategies to Investigating Franchise

Franchise Article: Franchise Basics