10 Questions to Ask Yourself and Your Future Franchisor
When considering prospective franchise opportunities, it’s important to know the right questions to ask to get all of the details necessary to make an informed decision about your purchase. Researching the background of your franchisor, and determining the support and assistance they will be able to offer you as you get started are just two key elements that you will want to consider before you sign any contracts.
- Have you and your lawyer looked over all of the
franchise documents, and feel that the terms and conditions
are fair and equitable? Do you understand all of the terms and conditions set
out in the contract? Do you feel comfortable signing the contract?
- Will you have exclusive territory rights for the duration of your
contract, or is there a risk that your franchisor will allow other businesses
to start up within your chosen area?
- What will happen if you want to end your contract? Are there penalties
involved, or are there circumstances under which this is acceptable?
- Are there any requirements within your contract that would encourage you
to engage in illegal or questionable practices? This is a huge red flag that
you shouldn’t be involved with the business.
- How many years has your franchisor been in business, and how many other
franchises do they have within their chain?
- What kind of support will you receive as a new franchisor, and then as an
established franchise? Is there training, upgrading, and emergency support
available? Are there a series of scheduled visits throughout the year?
- Have you had an accountant review all of the figures released by the
franchisor, and have these numbers been independently verified?
- What kind of reputation does the franchise have within the business
community? Also, can you speak with other franchisees to see how they feel
about working with the company?
- How much money will be required to purchase a franchise, and keep it
running until it turns a profit?
- Has the franchisor investigated franchisees thoroughly enough? You will
want to ensure that they are doing their part to hire qualified people on
their teams to maintain brand standards before buying a franchise from the
Franchise Disclosure Document for Dummies – Part 3
In Item 8 of the FDD, franchisors are required to disclose designated and approved suppliers, franchisees’ mandatory purchases, and any rebates they receive from vendors as a result of franchisee purchases.
What is an Area Representative?
The reason why anyone would choose being an Area Representative is that they are paid a certain portion of the initial franchise fee of each new franchisee they solicit as compensation. Aside from the sales commission the area representative may get paid by the franchisor a portion of the royalties received for servicing franchisees. In some cases, franchisors will pay the area representatives a portion of the fee received from new franchisees in the reps’ territory even though the area representative may have had nothing to do with the screening or recommending that particular franchisee. However, all these and other contingencies- such as compensation for furnishing many of the pre-opening and on-going services to the franchisee- should be covered in the area representation agreement.
Advertising and Promotion Watch: McDonald's Monopoly is Back
This month sees the return of a venerated promotional campaign, McDonald’s Monopoly. The promotion first began in 1987, and in the last decade has become an almost yearly tradition. Each year, certain McDonald’s products come with Monopoly game tokens, each with either a space from the Monopoly board or an instant win prize for items such as a small fries. Larger prizes are won by collecting all of a group of Monopoly properties, usually three, but sometimes two (Illinois Avenue, Indiana Avenue and Kentucky Avenue, for example). Each group of properties have one whose piece is much rarer than the others; for most of the groups, it’s the last alphabetically (Kentucky Avenue for the red properties, Ventnor Avenue for the yellow), but for the dark blue, it’s Boardwalk, as it is the last and most expensive property on the board. More recently, McDonalds developed an online counterpart to its in-store Monopoly game in which customers can roll virtual dice, or more recently pick one of three chance cards for various prizes.