Money issues surrounding franchising, the danger signals, and what to look for…

• The franchise has no operation already running to prove that it works in practice
• The offer suggests you can make a lot of money for very little work
• You answer an advert for a job vacancy that turns out to require your own investment in an opportunity
• The opportunity sells you the equipment to manufacture product or carry out a service without proof of the demand for it
• The business depends for its success on an advertising campaign that cannot take place until all the franchises have been sold
• There is no adequate explanation of the reasoning behind any claims made for potential profitability or income.
• The franchisor is more interested in selling you the business than finding out whether you have the experience and ability to run it.
• You have only met the franchisor in a hotel and there is no operating entity
• You are put under pressure to sign up now rather than lose the territory of your choice
• You are not given time to carry out due checks on company before making a decision
• The franchisor does not see the need for you to consult a lawyer and an accountant
• The franchisor wants to take a credit card impression for a deposit payment promising not to use it unless you confirm you wish to proceed
• Previous franchisees have failed and you are given no satisfactory explanation why
• Be aware of danger signs and ensure your choice is based on genuine opportunity that will be a good match for your interests, skills and financial resources and expectations.

When buying a franchise take your time, do your homework, research and always seek professional advice from a lawyer and an accountant.  A good franchisor will allow you the time and the space to do so and in some cases will actively support and encourage you to ensure you are making an informed decision.

A guide rule of thumb to follow is that for every 1000 dollars you invest in your franchise you should invest 1 hour in researching the opportunity.  Franchise money is important.  Buying and operating a franchise requires more than just having the economic means of paying for it.  Potential franchisees need to be well equipped by researching and understanding both the external and internal mechanisms of the potential business, franchisor opportunity.

They also need to take a long hard look at themselves and their current state of life skills and practices.  Do they have the time and energy to give a business what it requires? Are they passionate about making this decision at this time in their lives? Can they sustain the franchise money initial outlay?

There are three key factors to address in any economic climate, these are:

• Profitability
• Sustainability
• Strong competent leadership

There is an old saying that goes ‘a fool and his money are soon parted’ and this reflects those people who recklessly rush in and invest after making ill considered decisions, especially when it comes to franchising and money.

Established systems with a critical mass of profitable, satisfied franchisees will not only whether the current economic climate they may even come out trumps on the other side. However, this requires dynamic leadership and community inspired working environments where teams work to support each other, as well as having strong corporate governance and enduring customer appeal.

Also, most importantly although legislation has considerably increased the rights of individuals and corporate groups safety and protection against potential wrong-doing, there is no amount of legislation that protects a franchisee from a ill considered, rushed, un-researched investment decision.