How Can You Spot a Good Franchisor?
As you can imagine, it's absolutely crucial that you can identify the great franchisors from the just good and even horrendously bad. An easy way to do this can be to just ask this simple question.
"Franchisor, what business are you in?"
Most franchisors will answer that they are in the Sandwich business, the car repair business, home decoration business etc. Very few will tell you that they are in the Franchise Business and yet this is exactly what they are in. First and foremost, you want to know that the franchisor you're dealing with clearly understands that they are in the franchising business.
So what signals should you be looking for to spot that good franchisor?
Take a look at how they earn their income.
Do they appear to be charging large up front franchise fees?
Any franchisor who appears to be relying on franchise fees for their success needs to be avoided, as they are most likely to fail, just as soon as the supply of prospective franchisees dries up. The really good franchisors who understand the franchise business will be more concerned to ensure their on-going revenue through royalty fees, or sales of proprietary products.
For the good franchisor to grow their revenue through royalty fees and, or proprietary product sales they need to ensure the success of their franchisees (YOUR SUCCESS!). Profitable franchisees will ensure a profitable franchisor! So they are most likely to be focused on selecting the best candidates as franchisees and ensuring that their systems and on-going support build a win-win for both themselves and their franchisees.
These are the guys you want to be doing business with!
Wishing You Every Success With Your Franchise.
Posted: Tuesday, August 20, 2013