7 things you should know before signing a franchise agreement

  1. Know how you are going to get out. Like a Hollywood wedding, the pre-nup is the most important part because when the romance is gone, all you have is the paperwork. Make sure you read yourself and ask professionals about the things you don’t understand – don’t simply rely on (e.g.) lawyers to do everything for you because YOU are the one getting married – not the lawyer.
  2. The franchisor is in a different business to you. They are selling businesses (B2B) and you will run that business, which is more often than not a B2C business. This means franchisor and franchisee have different objectives and metrics of success. If both parties understand this, there is much less conflict later on.
  3. You should know why you are getting into the business. Understand your own motives and be honest. If you are looking for an easy way to make money, don’t do it because despite what a franchisor might say, it is never easy – at least not the first five years.
  4. Know that no one can guarantee anything and that you are still exposed to some risk. A franchise system is attractive because it offers lower risk – not because it has no risk.
  5. Every market is different and every franchisee is different and franchisors are constantly learning and adapting their offer to the market. The franchisee has an important role to play in all that by providing feedback and market intelligence. However, you must be willing to accept and live by the system because whilst every market is different, yours is not as unique as you would like to believe. If you can’t live by the system, don’t buy into the system.
  6. The franchisor wants to sell franchises so they will present the realistic, best-case scenario. You should instead plan for the realistic, worst-case scenario – especially in terms of financing the business.
  7. The best franchisors have the best communication systems. Things like conferences, training opportunities, supplier meetups, newsletters and intranets demonstrate that they take their network seriously and franchisees can take comfort from that.

Dennis:

PS: Franchisors we can help you save time, money and reduce risk and effort. Have a look...