Checklist for Evaluating a Franchise

COMPANY

1. How long has the firm been in business, and what is it’s financial strength?

2. What are the company’s plans for future development?

3. How does it rate with the Better Business Bureau and other rating organizations?

4. How selective is it in choosing Franchisees?

PRODUCT

5. What is the product’s quality; is it staple, fad, or luxury item?

6. Is it seasonal?

7. How well is it selling, and how long has it been on the market?

8. would the franchisee buy the product on it’s own merit?

9. Is the product competitively priced and attractively packaged?

10. Where is it sold?

SALES AREA

11. Is the territory well defines and large enough to offer good sales potential?

12. What are the growth potential for territory?

13. What is the income level, and are there fluctuations in income?

14. What competition is present, and how are nearby franchises doing?

CONTRACTS

15. Is the contract complete; does it clearly define the responsibilities and liabilities of each party?

16. Does it benefit and protect both parties?

17. Can it be renewed, terminated, or transferred?

18. What are the conditions for obtaining a franchise?

19. Under what conditions will a franchise be lost?

20. Is a certain size and type of operation specified? Must it be maintained?

21. Is an additional payment required each year?

22. Does the franchisor collect a percentage of gross sales?

23. Must a certain amount of merchandise be purchased?

24. Is there an annual sales quota?

25. Can the franchisee return merchandise for credit?

26. Can the franchisee engage in other business activities?

CONTINUING ASSISTANCE

27. Does the franchisor provide continuing assistance? Can it be obtained quickly?

28. Is there training for franchisee and key employees?

29. Are manuals, sales kits, accounting systems supplied?

30. Does the franchisor select store locations, design store layout and displays, handle lease arrangements, and
select opening inventory?

31. Do they provide inventory control methods?

32. Do they provide market surveys?

33. Do they help analyze financial statements?

34. Do they provide purchasing guides?

35. Do they help finance equipment?

36. Do they make direct loans to qualified individuals?

37. Do they actively promote the product or service?

38. How and where is the product being advertised?

39. What advertising aids does the franchisor provide?

40. What is the franchisee’s share of the advertising cost?