Franchising: Red Light, Green Light
Is investing in a franchise a sound financial move? Unfortunately, there is no concrete answer. While there are many great reasons to invest in a franchise, whether it turns out to be a great investment or not should be addressed on a franchise-to-franchise basis. When doing your due diligence as part of your franchise purchasing process, be on the lookout for the signs of a quality brand, as well as the red flags.
“Green Light” Franchise Checklist:
A Proven Concept
From training to marketing to the operations, franchises with a proven concept with which you can hit the ground running should be on your radar.
A sign of a good franchise is one that offers both initial and ongoing training programs. On the Franchise Canada Chats podcast, PropertyGuys.com (one of Canada’s largest private real-estate franchises) franchisor, Ken LeBlanc, shared how he doesn’t require his franchisees to have a real-estate background before investing in the business! However, the franchise puts its prospective franchisees on the right track towards success with a proven training program. You can listen to Ken’s insight into the PropertyGuys.com training program here.
When you’re part of a reputable franchise system, you’re never alone. You’ll always have people you can lean on (i.e. head office, fellow franchisees) to help you throughout the life of your business.
A good franchisor will prioritize protecting the brand and its reputation. Customers tend to choose brands that they can trust. Make sure you find a franchise that ensures the brand’s reputation is maintained consistently.
“Red Light” Franchise Checklist:
Spotty Disclosure Documents
A Franchise Disclosure Document that is incomplete and has missing information is never a good sign. It’s important to have a lawyer carefully look over the document to identify red flags before investing in a franchise.
Inadequate Training and Support
If there’s not enough training and support, your chances of success are minimal. If a franchise system doesn’t have a comprehensive training and support program in place for its franchisees, this is usually a sign that they don’t have your best interests in mind and that they are not committed to helping you thrive as a franchisee.
You should avoid investing in a franchise that doesn’t have positive feedback from its current franchisees. Doing your due diligence by talking to other franchisees is important. You can also read current franchise success stories to learn more about the business from franchisees first-hand too.