How to avoid a bad franchise
To help make sure you choose an ethical franchise then do as much as research as possible. There is no such thing as too much research. Do your homework and consider the following key points:
Are they a member of the Franchise Council of Australia? Or any other franchise association? Members of the FCA promote and follow ethical franchising. In the grand scheme of things, it is not expensive to join the FCA and so be wary if a franchise tells you that they cannot afford the membership fees.
What is their background? How long have they been running the business and the franchise? What is their financial situation? How many franchisees do they have? Have any failed? Etc.
What is their reputation? Google them! Do an internet search to see if you can uncover anything about the business or the owner. Write down any concerns you have and speak to the franchisor about them.
Is their franchise agreement in order and fully covers all aspects of the business. Get a franchise lawyer to check it out. The majority of people we speak to who have a failed franchise business did not use a lawyer who specialized in franchising. If they had, they would have been told to walk away. Hiring a lawyer to look over it can be expensive, but it would be much, much more expensive in the long run if you didn’t.
Walk away if they are pushing you into signing. No ethical franchisor would do this. An ethical franchisor would want you to make sure that their business is right for you as you are more likely to be successful if you are happy in it. A bad franchisor just wants your money!
The most important source of information for prospective franchisees is talking to existing franchisees. These are the people who have done it and so in the best position to tell you how it really is. A good franchisor will give you a list of all franchisees allowing you to contact who you wish. Alarm bells should ring if you are given the name of only a couple as you can be sure that these will be the best performing ones in the network or maybe linked to head office. Ask to go and shadow a franchisee to see how the business is run. If they have any failed franchises in the network, ask to have access to them.
Most importantly, trust your gut feeling. If something does not feel right then walk away.