Is it wise to become one of the first franchisees in a new franchise system?

While it’s a thrilling proposition to get in on the ground floor of what is hopefully a superstar concept, the downside is that some new franchises don’t survive the journey and are buried in unmarked graves along the way. Before buying into a young or unproven system, it’s important to research the franchise. Since there […]


While it’s a thrilling proposition to get in on the ground floor of what is hopefully a superstar concept, the downside is that some new franchises don’t survive the journey and are buried in unmarked graves along the way.

Before buying into a young or unproven system, it’s important to research the franchise. Since there are little or no proven results from other franchisees who have gone before you, you need to be asking the franchisor the right questions.

Here’s a look at the most common types of new franchise opportunities – and the questions you should ask before signing up:

1. The mature company that is new to franchising.
Questions to ask: How do your training programs for new franchisees differ from the previous training programmes for new employees? What support systems do you have in place for franchisees, such as manuals, DVDs or online intranets? Are you willing to treat franchisees as business owners?

2. The experienced franchise company that is changing its traditional operating model to something new.
Questions to ask: What research and testing supports the proposition that this new model will work better than the old one? How many units of the previous model have failed in the past two years? How many do you expect to lose in the next two years? What changes have been made to your marketing programmes to support the new model, and how will you allocate marketing support and rands in the future between the new and old models?

3. The fairly young company that’s new to franchising.
Questions to ask: Do the company executives have previous experience growing a franchise company, or are they working with advisers who do? Does the company have sufficient cash reserves to weather any storms during its initial ramp-up period? How many training and support people does the company have and what is their background and experience? What kind of discounts on fees and other expenses are you offering to the initial group of pioneer franchisees?

Jeff Elgin
About the Author
Jeff Elgin has developed a consulting system that matches pre-screened, high-quality prospective franchisees with the franchise opportunities that best fit their personal profile.

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