Part 3 of a 10-Part Series on the AAFD Road Map to Buying a Franchise.
If Your Franchise Doesn’t Have All Eights Of These Features, You Could Be Vulnerable for Trouble
If you’ve already started your franchise search, then you know that there are a lot of franchisors on the market looking for new franchisees. Prospective franchisees must be exceedingly careful when searching for and evaluating franchise opportunities. There are many low-caliber franchises out there with slick websites and big promises that can easily sweep an unwary prospect right off their feet and right into a bad business.
The franchise you choose will be the biggest decision you make as a franchisee and will play a major role in whether you are financially successful and professionally satisfied. That’s why the AAFD has developed its list of Eight Things to Look For in a Franchise Opportunity. This is our list of the top qualities you should look for in any franchise you’re considering. If even a single quality is missing, consider that a big red flag.
- Quality Products and Services: Select a franchise that is primarily interested in distributing quality products and services to customers. Although this rule may seem obvious, many (if not most) franchising companies are primarily interested in selling franchises and are less concerned with the quality of the products and services they are theoretically in the business of selling.
- Franchising as its Primary Distribution Method: Your franchise company should be dedicated to franchising as its primary mechanism of product and service distribution. Be wary of franchisors with a large number of company-owned stores, or that distribute its products through other channels, such as supermarkets or discount stores.
- Established Market: Your franchisor should produce and market quality goods and services for which there is an established market demand. The value of franchising emanates from the value of the franchisor. Too many prospective franchisees cannot qualify for a widely-recognized franchise and settle for a lesser known system thinking the franchise concept is more important than the product or trade name.
- A Well Established Trade Name. If you are looking at a franchise that doesn’t offer an established brand, you must be able to justify the additional cost of a franchise based upon measurable experience, expertise, or systems that offset the lack of an established market.
- Strong Business and Marketing Plans: Evaluate your franchisor’s business plan and marketing system. A well-established, well-designed marketing system includes substantial franchisee training and overall support.
- Good Franchisee Relationship: Your franchisor should have good relationships with its franchisees. Likewise, the franchisees should have a strong franchisee organization, such as an AAFD Chapter, which has negotiating leverage with the franchising company. Strong franchisee associations will pave the way toward successful and cooperative franchising systems.
- Strong Sales and Earnings Data: Only consider franchising companies that provide sales and earnings data which demonstrate an attractive return on your investment. Don’t believe franchisors who claim that they are forbidden by law to provide earning projections and evidence of actual performance. On the contrary, all state and federal laws regulating franchising actually encourage franchisors to provide this information to prospective franchisees.
- Support of Fair Franchising Standards: Select a franchisor that supports the AAFD’s Fair Franchising Standards and respects the Franchisee Bill of Rights of the AAFD.
Robert Purvin is the Chairman and CEO of the American Association of Franchisees and Dealers, a national non-profit trade association that is dedicated to supporting and protecting the rights of franchise owners.
The AAFD's mission is to define, identify and promote Total Quality Franchising practices, and the AAFD supports is mission by:
Promoting strong and effective independent franchisee associations as affiliated chapters of the AAFD.
The development of the AAFD's Fair Franchising Standards, the most comprehenisve body of negotiated principles of recommended franchise practices in existence.
The advocacy of fair and balanced franchise agreements and relationships that respect the legitimate business interests of both franchisors and franchisees for the good of the franchise relationship.
The education of franchisees and prospective franchisees by the development and publication of the AAFD Fair Franchising Standards and the promotion of the AAFD Franchisee Bill of Rights.