10 Criteria for Assessing a Franchise

10 Criteria for Assessing a Franchise
by Sean Kelly

Choosing the right franchise opportunity may well be the most important business decision you’ll ever make. In order to help you make a thorough assessment of any given franchise opportunity, we have compiled the top ten criteria that you should use to help guide your franchise decision. This list is a compilation not only based on the professional experience of the franchise consultants at franchise consultancy IdeaFarm, but from recommendations made by the Federal Trade Commission (FTC), the Small Business Administration (SBA), the International Franchise Association (IFA), and other sources.

1. Your motivation
Actually, the first step in the franchise process is to determine your own motivation for growing with a franchise, and what elements are important to you. While there are certainly both good and bad franchise opportunities, it is also important that you find the franchise opportunity that best meets your immediate and ongoing needs. Some franchise owners are more motivated by lifestyle and quality of life than economic gain; they would rather have a franchise with limited hours and fewer hassles. Others want to maximize income and build a fulltime financial empire. Still others are looking to supplement their incomes without leaving their current jobs. In the end, the best franchise is the one that’s right for you.

2. Franchise Concept
Gain a clear understanding of how the business concept works. Who are its customers? How does it attract them? What is the product line? How does it compare to its competition? Is it the operation itself designed from both the customer’s and the operator’s viewpoint? Is the operation efficient? Is the product line sufficiently appealing in good economic times and bad? How is profit generated?

3. Market/Demand
What is the demand for the franchise business? What is the size of the market? Is its growth dramatic, flat or declining? What changes are taking place in the industry? What changes are forecasted in the next 5-10 years? Is the franchise concept well-positioned to benefit from social or industry trends? Is it positioned not only to meet the needs of today’s consumer, but tomorrow’s consumer as well? What is the demand in your intended geographical area? Who will be your competitors?

4. Background/History
How did the business start? Evolve? When was the company and concept founded? Was its original focus the same as it is today? How has it changed? Did it thrive through a variety of economic times? Has it built a strong reputation and a loyal customer base? Does management show a commitment and/or talent for fine-tuning and improving the concept? For adapting to changes in the marketplace?

5. Company/Team
What is the company’s experience, both individually and collectively? Have they weathered different economic trends and situations? Can they adapt to trends? Are they stable, and committed to growth? Do they have resources that you will continue to benefit from? Who will provide your support? Do you respect their knowledge? Are you comfortable working with them? Do you get the sense that they truly have your best interest in mind?

6. Start-up Benefits
What initial services and training does the company provide? Do they help you find or select a location? Do they provide thorough training, both in the classroom and in the field? Do they provide design assistance, blueprints, equipment sourcing, etc. Getting up and running can be stressful. A good franchisor will provide strong assistance in this area, and have a well organized, well articulated start-up program.

7. Ongoing Benefits
What ongoing benefit does the franchise program provide? Are there proprietary products or processes you will continue to benefit from? How extensive is the field support? Will you get visits from company representatives at your location? How often? Will they provide refresher or ongoing training programs for you and your staff?  What marketing programs and assistance will you receive? Will you benefit from their buying programs and vendor relationships? In addition to use of the brand name, your “royalties”should be considered a fee for ongoing services. A good franchisor provides value that exceeds the cost of the royalties and benefits that outweigh your loss of autonomy.

8. Qualifications
How does the company describe their profile franchisee? Are you a match? Do you have the experience and/or the professional skills they say are necessary? Do you meet or exceed their stated financial requirements? Are you looking to locate in an area that is logical for the expansion of their brand? It is important that you are realistic about your ability to finance and support your chosen franchise, even if you get off to a slow start.

9. Selection Process
What are the steps you must follow to become a franchise owner? The franchise selection process should not be sales pitch, but rather a series of informational exchanges that help both sides determine whether the franchise is a good fit for you, and vice versa. It is important for you to know the process and the steps involved in the franchisors system so that you know where you are, and where you are going, at all times.

10. Reputation
What do their franchisees have to say about the company? Current franchise owners are a primary source of good information. What do their vendors say about them? How enthusiastic and loyal is their customer base? Have they been able to build and sustain a strong brand reputation on both the corporate and consumer levels? Be sure this is a company that you’ll be proud to be associated with.