by Rudolf Kotek
Consider master, area or multiple unit franchising only if you have strong financial resources. If you do have those resources, choose a business field of which you are knowledgeable.
This quality will make you more attractive to a Franchisor and will help you attain a successful future. Select a financially strong Franchisor with a proven commitment of support to Franchisees.
Determine the experience of the Franchisor and/or other Franchisees in operating units in the kinds of locations you want. Inquire, too, about the advertising assistance you will receive. Investigate all areas of the entire franchise system, with the same concern you would exercise in selecting a single unit franchise.
How long has the franchise system been in business? Has the management bounced around from franchise system to system, or has it been dedicated consistently to the franchise operation that interests you? Be sure you know exactly which rights are being granted to you and which are retained by the Franchisor. Can the Franchisor open company-owned units in your territory and thus be your competitor?
Most Franchisors meet expected standards of integrity, but failing to ask critical questions could prove to be a costly error. Check the facts. Examine whether an area development schedule is reasonable and can be met, and understand what happens if you should fail to meet that schedule.
You should also understand your right to develop additional franchise sites outside that territory. Buying a franchise, and particularly an area or multiple unit franchise, is potentially the largest personal investment decision you’ll ever make. Don’t be impulsive.
Take your time, and enlist the assistance of franchise-experienced professional like yours truly.
Product sourcing
It is essential for the area developer to determine as soon as possible whether it is likely to encounter difficulties in sourcing any necessary products, equipment or ingredients locally.
For example, in a food franchise, are all key ingredients available locally in the same grade and quality as used in the Franchisor’s operations? If not, what is the cost of importing them from the US or other countries? How many international deals has the Franchisor completed? What countries were involved? What is the history and current status of those other international deals in terms of the developer’s success in meeting development goals and profitability? Have disputes risen between the Franchisor and developers or international Franchisees, and how were they resolved?
Potentially, the most informative source of information and insight into the Franchisor, its experience, practices and capabilities may be found by contacting a Franchisor’s existing international developers, and its US and foreign Franchisees. In the USA, it is extremely common for prospective Franchisees to contact a Franchisor’s existing Franchisees. Surprisingly, in the international context, few developers make the effort to contact them.
Rudolf Kotik is the founder of RK Franchise Consultancy Inc, which developed more than 350 Filipino Companies into Franchise Systems. Email: rk@rkfranchise.com; Websites: www.rkfranchise.com, www.franchise.ph.
