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ST-04 Franchising SCORE Chapter 570
	Franchising Checklist
QUESTIONS TO ANSWER AFFIRMATIVELY BEFORE GOING INTO FRANCHISING Check if answer is YES  THE FRANCHISOR _1. Has the franchisor been in business long enough (5 years or more) to have established a good reputation?  _2. Have you checked Better Business Bureaus, Chambers of Commerce, Dun and Bradstreet, or bankers to find out about the franchisor's business reputation and credit rating?  _3. Did the above investigations reveal that the franchisor has a good reputation and credit rating?  _4. Does the franchising firm appear to be financed adequately so that it can carry out its stated plan of financial assistance and expansion?  _5. Have you found out how many franchises are now operating?  _6. Have you found out the "mortality" or failure rate among franchises?  _7. Is the failure rate small?  _8. Have you checked with some franchisees and found that the franchisor has a reputation for honesty and fair dealing among those who currently hold franchises?  _9. Has the franchisor shown you certified figures indicating exact net profits of one or more going operations which you have personally checked yourself?  _10. Has the franchisor given you a specimen contract to study with the advice of your legal counsel?  _11. Will the franchisor assist you with:  _A management training program? _An employee training program?  _A public relations program? _Obtaining capital? _Good credit rating?  _Merchandising ideas? _Designing store layout and displays?  _Inventory control methods? _Analyzing financial statements?  _12. Does the franchisor provide continuing assistance for franchisees through supervisors who visit regularly?  _13. Does the franchising firm have an experienced management trained in depth?  _14. Will the franchisor assist you in finding a good location for your business?  _15. Has the franchising company investigated you carefully enough to assure itself that you can successfully operate one of its franchises at a profit both to it and to you?  _16. Have you determined exactly what the franchisor can do for you that you cannot do for yourself?  THE PRODUCT OR SERVICE  _17. Has the product or service been on the market long enough to gain good consumer acceptance?  _18. Is it priced competitively?  _19. Is it the type of item or service which the same consumer customarily buys more than once?  _20. Is it an all-year seller in contrast to a seasonal one?  _21. Is it a staple item in contrast to fad?  _22. Does it sell well elsewhere?  _23. Would you buy it on its merits?  _24. Will it be in greater demand five years from now?  _25. If it is a product rather than a service:  _Is it packaged attractively? _Does it stand up well in use?  _Is it easy and safe to use? _Is it patented? _Does it comply with all applicable laws?  _Is it manufactured under certain quality standards?  _Do these standards compare favorably with similar products on the market?  _If the product must be purchased exclusively from the franchisor or a designated supplier, are the prices to you, as the franchisee, competitive?  THE FRANCHISE CONTRACT  _26. Does the franchise fee seem reasonable?  -27. Do continuing royalties or percent of gross sales payment appear reasonable?  _28. Is the total cash investment required and the terms for financing the balance satisfactory?  _29. Does the cash investment include payment for fixtures and equipment?  _30 .If you will be required to participate in company sponsored promotion and publicity by contributing to an advertising fund, will you have the right to veto any increase in contributions to the "fund"?  _31. If the parent company's product or service is protected by patent or liability insurance, is the same protection extended to you?  _32. Are you free to buy the amount of merchandise you believe you need rather than being required to purchase a certain amount?  _33. Can you, as the franchisee, return merchandise for credit?  _34. Can you engage in other business activities?  _35. If there is an annual sales quota, can you retain your franchise if it is not met?  _36. Does the contract give you an exclusive territory for the length of the franchise?  _37. Is your territory protected?  _38. Is the franchise agreement renewable?  _39. Can you terminate your agreement if you are not happy for some reason?  _40. Is the franchiser prohibited from selling the franchise out from under you?  _41. May you sell the business to whomever you please?  _42. If you sell your franchise, will you be compensated for the good-will you have built into the business?  -43. Does the contract obligate the franchiser to give you continuing assistance after you are operating the business?  _ 44. Are you permitted a choice in determining whether you will sell any new product or service introduced by the franchiser after you have opened your business?  _ 45. Is there anything with respect to the franchise or its Operation which would make you ineligible for special financial assistance or other benefits accorded to small business concerns by federal, state, or local government?  _46. Did your lawyer approve the franchise contract after he studied it paragraph by paragraph?  _47. Is the contract free and clear of requirements which would call upon you to take any steps which are, according to your lawyer, unwise or illegal in your state, county, or city?