Checklist of Information to Secure From a Franchisor

Use this checklist when doing your own investigation and information gathering.


Checklist of Information to Secure From a Franchisor

Before you sign those franchise agreement documents – look at the below checklist for things you need to talk to your franchisor about:

  1. Is the franchisor a one-person company?
  2. Is the franchisor a corporation with an experienced management team that is well trained?
  3. Does the franchisor operate a business of the type being franchised?
  4. Is the franchisor involved in other business activities?
  5. Is the franchisor offering you an exclusive territory for the length of the franchise?
  6. Can the franchisor sell a second or third franchise in your market area?
  7. Do you have the right of first refusal to adjacent areas?
  8. Will the franchisor sub-let space to you?
  9. Will they assist in finding a location for your franchise operation?
  10. Must you lease fixtures, signs or equipment from the franchise? If so, are the prices reasonable?
  11. Does the franchisor provide financing? If so, what are the terms?
  12. Does the franchisor require any fees – other than those described in the offering circular – from the franchisee? If so, what are they?
  13. Has the franchisor given you information regarding actual, average or forecasted sales, profits and earnings?
  14. Will the franchisor provide you with the success rates of existing franchisees and provide you with their names and locations?
  15. Are there any restrictions on what items you may sell? If so, what are they?
  16. Does your prospective franchisor allow variances in the contracts of some of their other franchisees? What is the nature of the variances?
  17. In the event you sell your franchise back to your franchisor under the right of first refusal, will you be compensated for the goodwill you have built into the business?
  18. Does the franchisor have any registered trademarks, service marks, trade names, logotypes and  symbols?
  19. Are you, as a franchisee, entitled to use them without reservation?
  20. Are there restrictions, exceptions or conditions? If so, what are they?
  21. Does the franchisor have existing patents and copyrights on equipment you will use or items you will sell?
  22. Does the franchisor have endorsement agreements with any public figures for advertising purposes? If so, what are the terms?
  23. Has the franchisor investigated you carefully enough to assure that you can successfully operate the franchise at a profit both to them and to you?
  24. Has the franchisor complied with regulations specific to the industry in which your franchise business will operate? (Include any special licences or legal restriction on operations.)
  25. Does the franchisor have a reputation for honesty and fair dealing among the local firms holding their franchises?

Related: How Old are South African Franchisees?

Other questions you may not have considered are

  1. How many years has the firm offering you a franchise been in operation?
  2. What is a description of the franchise area offered to you?
  3. What is the total investment the franchisor requires from the franchisee?
  4. How does the franchisor use the initial franchise fees?
  5. What is the extent of the training the franchisor will provide for you?
  6. What are your obligations for purchasing or leasing goods or services from the franchisor or other designated sources?
  7. What are your obligations in relation to purchasing or leasing goods or services in accordance with the franchisor’s specifications?
  8. What are the terms of your agreement regarding termination, modification and renewal conditions of the franchise agreement?
  9. Under what circumstances can you terminate the franchise agreement? What will it cost to terminate?
  10. What are the background experience and achievement records of key head office personnel?
  11. What is the franchisor’s experience in relation to past litigation or prior bankruptcies?
  12. What is the quality of the financial statements the franchisor provides you?
  13. Exactly what can the franchisor do for you that you cannot do for yourself?
Tracy Lee Nicol
About the Author
Tracy-Lee Nicol is the managing editor of Franchise Zone Magazine and deputy editor of Entrepreneur Magazine. She studied her Masters degree in Art History and Visual Culture at Rhodes University and spent the next two years working and travelling in Asia. Her love of people, business and teaching is reflected in telling the stories of entrepreneurs, franchisees and franchisors, inspiring others to take the leap to being their own boss and bringing about positive change in South Africa.

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