Step Five - Evaluate the Franchise

When you first contact the franchisor to find out more about their opportunity, they will probably ask you some basic questions over the phone or ask you to complete an initial form. Meetings and interviews are very time-consuming, so it is a good idea for both of you to see if you meet the basic criteria for a franchisee.

You should then receive some information and be invited to call them to arrange a meeting if you are interested. Read this information thoroughly, and note down the first impressions and any initial questions you have when you first read it. Smaller franchises, in particular, may not have glossy brochures to send you, but the information should at least be informative about the company’s history, the market for its products or service, the franchisee’s role, and the costs involved. Make sure you have digested all this before the first meeting.

You will probably have two or three interviews with the franchisor. Remember that these interviews are for the benefit of both parties. While the franchisor will want to assess your suitability as a franchisee, your purpose is to obtain the information you require to make a decision. Don’t be afraid to ask questions (see next point).

As discussions progress, the information required by both parties will become more detailed. All good franchisors will provide a disclosure document that contains detailed information about the franchise and your own prospective business within it. You will probably be asked to sign a confidentiality agreement before receiving this, as it will contain information that the franchise would not want to publish to competitors. Such a document is a requirement if you are dealing with a member of the Franchise Association and non-members may also provide such a document.

In addition to confirming the information contained within the disclosure document, carry out your own research into the franchise, the people involved, its history, the market it serves and the franchisee’s role. Read up everything you can in trade journals as well as in newspapers and the Internet. The latter can be very useful but it pays to check the quality and the date of information posted on the Internet as much is out of date or not relevant to New Zealand. If you come up with any queries, raise them direct with the franchisor.

Essential reading
How to research your franchisor
What’s in the disclosure document?