Checklists for Franchisees

Last Verified: 2007-09-25

Summary
Franchising has become a major force in today's business environment Franchising is a
system of distribution used by com!anies to se"" !roducts or !erform services #he com!any
$franchiser% offers its technica" e&!ertise' estab"ished mar(eting system' symbo"s and
trademar(s' and ongoing o!erationa" su!!ort' in e&change for a continuing right to receive
roya"ties from the o!erator $franchisee% and the entit"ement to "imit the amount of business
contro" #he aim is to be mutua""y beneficia" to both !arties' by combining the mar(eting and
technica" strengths of the franchiser )ith the "oca" mar(et fami"iarity' energy and ca!ita" of
the franchisee
#here are many o!!ortunities avai"ab"e regarding franchised businesses #o add further
com!"e&ity' there are many variations in the franchising methods offered #o ensure your
success' you must be fu""y a)are of and eva"uate a"" avai"ab"e facts !ertaining to your
franchise o!!ortunity
#he fo""o)ing chec("ist of *uestions shou"d assist you in ma(ing a decision about ac*uiring a
franchise +n addition' )e strong"y recommend that you consu"t )ith your "a)yer and
accountant before you sign any documents or contracts
Self Evaluation
,o you have the ca!ita" re*uired for investment-
,o you have the necessary management s(i""s' education and
)or( e&!erience re*uired-
.re you fu""y a)are of the )or( invo"ved in running this
franchise-
/hat is the best franchise for me- $#he ans)er is a combination
of four things%
0 /hat ty!es of businesses are succeeding these days'
)ith every indication that they )i"" continue to
succeed-
2 /hat is the (ind of business you )ou"d "i(e to be in-
1 +s someone offering a franchise in your area of
interest' )hich you be"ieve )i"" he"! you to succeed'
and that you can afford-
2 3an you )or( )ithin the "imits of a franchise
system- Franchisors are not "oo(ing for rea"
entre!reneurs' but more entre!reneuria" sergeants
)ho can fit into the system
The Franchise Operation
/hat is the franchiser's bac(ground and ho) "ong has it been
offering franchises-
+s the franchise financia""y stab"e-
4o) se"ective is the franchiser )hen choosing its franchisees-
,id they as( your *ua"ifications and financia" standing-
/ho are the !rinci!a"s invo"ved and are they e&!erienced in
business-
4o) many franchises are o!erating no)- .re ne) "ocations
being o!ened on a regu"ar basis- 4ave any "ocations fai"ed-
+f the franchise is ne)' )hat is its record of accom!"ishment-
/hat innovations has the franchiser introduced since first
starting-
.re you re*uired to meet )ith e&isting franchise o)ners-
,oes the franchiser !rovide "oca" on-going training for
franchisees for the "ength of the contract-
The Product or Service
/hat ma(es the !roduct or service uni*ue-
+s there a reasonab"e demand for it- 4ave sa"es been increasing
or decreasing- +s it seasona"-
+s it a !roduct or service you )ou"d buy-
.re you a""o)ed to carry other !roduct "ines-
+s it !riced com!etitive"y )ith simi"ar !roducts or services-
3an the franchiser guarantee continua" su!!"y at a fair !rice-
.re there !roduct )arranties or guarantees- /ho has
res!onsibi"ity-
+s the !roduct !rotected by a !atent' trademar(' or co!yright-
/hen your inventory "eve"s become "o)' can you use other
sources unti" the franchiser's !roducts arrive-
Location and Sales Territory
+s your territory c"ear"y defined and e&c"usive- /hat guarantees
do you have-
/hat is the sa"es !otentia" for the territory- 4as the franchiser
!rovided you )ith mar(et information and statistics to su!!ort
this-
/hat is the future gro)th !otentia"-
3an you se"ect your o)n "ocation- .re there f"e&ib"e standards
for "ocation and !remises- ,o you o)n or "ease- /hat are the
terms-
/hat com!etition' both franchises and non-franchise businesses
is in the area-
Other Franchisee Experience
4ave you been in contact )ith other franchisees- .s( the franchiser to give you a "ist of those
o!erating in your vicinity #hese are some of the *uestions you shou"d as( )hen you visit or
!hone them
/hat )as the tota" investment re*uired by the franchiser-
/ere there any hidden or une&!ected costs-
.re you satisfied )ith the *ua"ity of goods su!!"ied by the
franchiser-
4o) often and re"iab"e is de"ivery from the franchiser-
4o) "ong )as it before your o!erating e&!enses )ere covered by
revenue' and ho) "ong before you cou"d dra) a reasonab"e
sa"ary-
/ere the !rojected sa"es and !rofit figures !rovided by the
franchiser accurate-
4as your franchise been as !rofitab"e as you e&!ected-
/hat (ind of management and staff training )as !rovided- ,id it
meet your e&!ectations- /here )as it he"d- /as funding
!rovided by the franchiser-
4ave you ever had a serious disagreement )ith the franchiser-
/hat about- /as it sett"ed amicab"y-
,oes the franchiser res!ond !rom!t"y and he"!fu""y to *uestions
or advice you are see(ing-
.re you satisfied )ith the mar(eting' !romotiona"' and
advertising assistance that you receive from the franchiser-
+f you cou"d change your contract' )hat )ou"d you change-
/ou"d you recommend starting a franchise )ith this !articu"ar
franchiser-
/hat have you done to ma(e your franchise successfu"-
Franchise Contract
#he franchise agreement is a business contract that shou"d c"ear"y indicate the terms and
conditions re"evant to the business o!eration 4ave your "a)yer and accountant carefu""y
revie) the agreement' !articu"ar"y those areas dea"ing )ith ban(ru!tcy' termination'
rene)a"' transfer and sa"e of the franchise
,oes the contract !rotect yourse"f as )e"" as the franchiser-
.re the rights and ob"igations of both !arties c"ear"y stated-
+s the contract s!ecific as to the ty!e and si5e of o!eration you
are e&!ected to manage-
+s the nature' duration' cost and e&tent of your training out"ined
in the contract-
.re your !ayments to the franchiser c"ear"y s!ecified- .re the
fo""o)ing sho)n-
o the franchise fee6
o any other fi&ed year"y !ayments the franchiser receives6
o roya"ty !ayments6
o advertising !ayments6
o fees for continuing services !rovided by the franchiser
7ust you !urchase your essentia" su!!"ies from the franchiser or
designated su!!"iers-
+s there a minimum amount of merchandise you must !urchase
from the franchiser each year- +f this merchandise cost is !ricier
than other com!arab"e !roducts' is this a hidden franchise cost-
/hat ha!!ens if su!!"ies are interru!ted- 3an you !urchase
goods from a"ternative su!!"iers-
4ave you the right to the franchiser's "atest innovations-
+s there an annua" sa"es *uota- +s it attainab"e-
/hat ty!es of re!orts are you e&!ected to !rovide the
franchiser-
,oes the contract cover in detai" a"" of the franchisor's verba"
!romises made during the intervie)s-
/i"" the franchiser maintain any necessary federa" and !rovincia"
registrations-
3an the contract be rene)ed or bro(en- +f so' on )hat terms-
/hen confronted )ith a month"y "oss' can roya"ty !ayments be
deferred to a "ater' more !rofitab"e month-
,o you have to fo""o) franchiser contro"s and !o"icies e&act"y' or
can you e&ercise some creativity regarding the !roduct or service
and its de"ivery-
+f "easing the "ocation' )i"" the "ease be for the same term as the
franchise agreement- 3an the "ease be rene)ed if you rene) the
franchise-
.re you res!onsib"e for the construction or im!rovement of
!remises- +f so' )i"" the franchiser !rovide you )ith !"ans and
s!ecifications' and can these be changed or a"tered-
#o )hat e&tent can you choose your territory or "ocation-
.re you !ermitted to have mu"ti-"ocations )ithin your territory-
3an you se"" the franchise- /hat are the conditions-
3an you (ee! any !rofits made from the sa"e- 4o) is the sa"e
!rice determined-
3an you terminate the contract if' for some reason' you have to-
+f you terminate the contract' is there a !ena"ty cost-
/hen and ho) can the franchiser terminate your franchise-
4o) )i"" you be com!ensated for the good)i"" you have bui"t u!
in the business-
+f you defau"t on the contract' ho) much time do you have to
rectify the situation-
+s there an arbitration c"ause regarding defau"ts-
/hat ha!!ens to the business in the event of your !ro"onged
i""ness or death- 4ave *uestions regarding succession been
c"ear"y addressed-
.re you !revented from engaging in any other business activity
for the duration of the contract-
,oes the contract !revent you from estab"ishing' o)ning' or
)or(ing in a com!eting business for a certain number of years
after termination of the contract-
8efore you sign the contract' are you sure that the franchise can
do something for you that you cannot do for yourse"f-
For more information on franchises contact:
3anadian Franchise .ssociation
9uite 00:
5199 ;g"inton .venue /est
#oronto' <ntario 793 5=:
#e": 20:-:95-2>9: or 0->00-::5-2212
Fa&: 20:-:95-0950
;mai": info?cfaca
/eb site: htt!:@@)))cfaca@
3"ic( on ABet more information hereA for detai"s on ho) to subscribe to the !ub"ications "isted
be"o):
Franchise 3anada 7aga5ine - a bi-month"y maga5ine geared at
entre!reneurs interested in ac*uiring a franchise
Franchise 3anada ,irectory - #his annua" directory is fi""ed )ith
editoria"s on estab"ishing a successfu" franchise and a
com!rehensive "isting of franchises avai"ab"e in 3anada
3anadian franchisescom
9uite >11
212-5029 3ountry 4i""s 8ou"evard C/
3a"gary' .8 #1. 5=9
#e": 201-527-7229
Fa&: 201-175-0212
;mai": info?canadianfranchisescom
Franchise 4andboo(
c@o ;nter!rise 7aga5ines' +nc
0020 C 8road)ay' 9uite 000
7i")au(ee' /+ 51202
#e": 202-272-9977
Fa&: 202-272-9971
;mai": info?franchisehandboo(com
;ntre!reneur 7aga5ine
2225 7c3abe /ay
+rvine' 3. 92:02
#e": 929-2:0-2125
Fa&: 929-2:0-0212
Franchise ,irect
Dre!ared by: Bovernment of 9as(atche)an
http://www.canadabusiness.ca/servlet/ContentServer?
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