How To Evaluate A Franchise

Starting a business without any planning? Are you sure you can succeed without planning your journey? Absolutely not, you need to have a plan about what you will be doing and what you are aiming for. To draft an effective plan you need to evaluate every possibility to come up with the best option.

Same goes when deciding which franchise to acquire. Either you should choose any of the home-based franchises, new franchises UK, part-time franchises or van based franchises. You will then be evaluating the potential franchisors you can work with.

Here are some basic factors that you need to consider when evaluating a potential franchise.

Review the franchisor management system:

You need to have a good look at the management system of the potential franchisees. Conduct a good background check to understand how it operates. You need to check the experiences of the people working the franchise to know what skill set is needed to operate a business. It is essential that the workers have experience relevant to the field.

Know the allowed territory for franchisees

The franchisor defines territories for the franchisees, you need to understand to what extent you will be allowed to move and progress. You will three different types of territories such as, open, exclusive and protected. If your potential franchisor allows a small open territory then it can result in clashes on the bases of zone among the prevailing franchisees.

Understand the fees charged form franchisees

You will be paying a fee to the franchisor, in this case, you need to have a clear understanding of the elements they will be charging for. Basic charges include the royalty fee and the ad fund fee; the expenses are increased when there are additional charges for licensing and software system usage. Compare the type of fees every franchisor is charging and evaluate on this basis as well.

Review the financial statement of the business

You should be able to find the audited financial statement for the last three years. This will help you to understand the revenue flow of the business. You will also get an idea of the business growth looking at the royalties generated from franchisees. To an extent, it will give you a picture of what are the revenue and expenses components in the business.

Note down what supplies are needing the operation

If you are planning to acquire any of the food franchises UK, you need to understand what supplies would be needed in the functions. To have an ample supply you have to be in contact with vendors. You can find information from item 8 in the franchise disclosure document about the purchases from different vendors.

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