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I frequently get letters from
readers about acquiring a franchise. Any franchise, whether it relates to
marketing or not, needs to be approached with a great deal of caution and common
sense. This article is not the definitive “how to” in this area; but if you
follow these steps, you will have avoided several of the not-so-obvious traps
and pitfalls that cause prospective franchisees lots of trouble. Start with all
the documents the franchiser must, under Federal law, provide. Read them
carefully. Get your attorney to look them over too. Don’t use your regular
attorney, though. Pick one that has a verifiable track record in franchise law.
You need someone who really knows
the ins and outs of this particular field. Take a look at the market for this
franchise. Go to all the major search engines, including Google, Yahoo!, Ask.com
and the others. Take the time to do your due diligence. Find out how many people
have looked up the key words associated with this company or service in the last
six months. How much interest is there in this field, this service and this
particular company? Immediately open up news alert accounts with both Google and
Yahoo. Start monitoring what is being written about “franchising” in the media
on a daily basis. Check out chat rooms and related forums.
Go to popular online article directories like www.EzineArticles.com and look up
the word: “franchising”. You will find dozens of articles written on this topic
there. Register with them to be alerted and sent every new article they publish
on that topic. These are free services. Immerse yourself in the language,
strengths, weaknesses, opportunities and threats related to this specific
service and firm. Google the key officers of the franchiser. Find out more about
them and their respective backgrounds. Look for any past lawsuits by disgruntled
franchisees. Under law, this is supposed to be offered transparently in the
disclosure documents the franchiser must give you. If this firm has been sued
repeatedly, beat a path to the nearest door. Now continue your due diligence, by
being the ultimate mystery shopper. Track down the franchisees of this system
who are NOT on the list to contact given to you by the franchiser.
Often there are “under-the-table
deals” that have been made whereby a favored franchisee tells prospective new
franchisees how wonderful the system and the franchiser are...in return for
unspoken favors. I know this is true, it has happened to me. I have been
deliberately lied to many times by existing franchisees I thought I could trust,
wanting to curry favor and benefits from the head office. Talk to some of the
disgruntled franchisees who have quit the system or sued the franchiser. (If you
would like to see and hear more about what NOT to do when assessing a potential
franchise opportunity, click on the live link in the credits section below).
Talk to the customers of some of the existing franchisees. Figure out a way to
“interview” them, without kicking up too much dust in the marketplace, drawing
any attention to you or to the existing franchisee. Also get some answers from
the customers of this service and system. Find out what they like best, least,
how the franchisee has handled problems in the past, what is best about their
system, how they compare to others in the marketplace they have used; and
finally, learn if they will continue to use this franchisee/service; and why, if
not, why not? Now do your number crunching. Take three different potential
outcomes in terms of sales and the profits derived from each sales level. Use
“optimistic”, “pessimistic” and “most likely” results. Take the probability of
each of these different events occurring. For example, if your optimistic profit
level was $5,000 and you feel there is a 25% chance of gaining this result, then
take 0.25 times the $5K, and add it to the 60 % (0.6) times sixty percent of the
expected results of $10K; and finally add that to the 15% (0.15) chance of
earning the pessimistic result of $2K. The resulting math goes like this: .25 X
$5,000 + .60 X $10,000 + .15 X $2K = $7,550. This number is the combination of
the probabilities of three different events occurring. This is your most likely
expected value of these events. Put bluntly, this is what you'll likely earn in
this situation.
By now you should know if (a) this is the industry for you; (b) if this is the
best franchiser to work with; (c) if this concept and market has great
potential, less competition and more future staying power; and (d) if the money
that can likely be made and the fun of operating within this system is a good
enough return to warrant the risk and time it will take you to earn it.
Roy MacNaughton is a niche marketing coach
and business writer. He’s a seasoned marketer, with more than 30 years of
international marketing and franchising experience, including nine years online.
His new e-book, (Marketing Yours), teaches solo practitioners, entrepreneurs and
professionals how to market their most important product. To see his video on
"franchising" go to: http://members.viditalk.com/view/?id=9IHOBUHS16A1F3KRGMOL
Learn more at his blog:
http://www.UmarketingU.com
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