Franchisee Start-Up Checklist

You have made the decision to become your own boss and go into business for yourself. If your business plan involves buying a franchise, you will need to make some very important business decisions ... before you sign. To make the correct decision, you need to objectively evaluate the franchise opportunity and you own skills and level of commitment.

This checklist can help you assess the franchise you are interested in before you make the investment decision. Remember, it is far easier to prevent a problem than to try and fix the damage afterwards. Before buying a franchise you need to consider the following:

1. Is this the right opportunity for you? Evaluate your skills, strengths and weaknesses when deciding to buy a franchise.
2. Get Professional advice from an accountant, lawyer or other business expert who has experience in franchising before making any commitment.
3. Get and verify as much information about the financial details of the business as possible. Analyze the profit and loss statement and any annual reports that may be available.
4. Read the disclosure document and franchise agreement very carefully -- do not sign anything without reading and understanding it first. If you don't understand any document or any aspect of the document seek independent, expert advice before signing.
5. Insist on written representations from the franchisor. If the franchisor is unwilling to back up in writing any oral representations take that a warning sign.
6. Make sure you fully understand all the fees payable under the agreement, including what they are, how they are established and when fees are due.
7. Find out as much information as you can about the franchise. For instance, has the company ever been the subject of a court action?
8. Ask the franchisor for a list of existing franchisees, so you can speak to at least three to four current franchisees. This will enable you to test such matters as the accurate of the disclosure document, earning predictions and profitability, franchisor support and day-to-day operational requirements. Ask the franchise company for statistics relating to success rates.
9. Make sure you have everything needed to run the franchise. Ask about the specific requirements needed to operate the business. Do you need a license or special skill? Find out about training and the level of support the franchisor provides at the early stages of the business.
10. If there is a lease involved make sure you understand the terms and your rights and obligations under that lease agreement. Will the lease be in the franchisor's name? What are your options when the lease expires? Be sure you are provided a copy of the lease.
11. Is the franchise granted for a specified period of time? What is your position at the conclusion of the franchise period? Are you able to negotiate an extension? Be sure you have an exit strategy should the franchise agreement not be renewed.
12. Make sure you are appropriately funded. A lack of capital could turn all of your early expenditures into a complete waste.
13. Meet the key management figures of each franchise company. This is especially important for smaller franchise companies. Take the time to get to know both the company's executives and their field representatives.