So you’ve found a franchise you feel goodabout purchasing. But when it comes down to signing on the dotted line,feelings aren’t good enough. How can you tell if this apparently idealfranchise is really the right one for you?
To test your instincts, answer each of thefollowing 24 questions. If your answer to any of the questions is no, or ifyou’re simply not sure how to answer, further investigation of the franchise isdefinitely a good idea.
1. Does the franchisor have a good trackrecord?
2. Do the principals of the franchise haveindustry expertise?
3. Is the franchisor’s financial conditionstrong?
4. Does the franchisor thoroughly screenits franchisees?
5. Are the franchisor and its franchiseesprofitable?
TheProduct or Service
6. Is there demand for the product orservice?
7. Are industry sales strong?
8. Does the franchise’s product or servicefare well against competitors’ offerings?
9. Is the product or service competitivelypriced?
10. Is there lots of potential for growthin the industry?
The Market Area
11. Are exclusive territories offered?
12. Does the territory you’re consideringhave sales potential?
13. Is the competition strong in this area?
14. Are the other franchises near this areasuccessful?
15. Are the fees and royalties reasonable?
16. Are the renewal, termination andtransfer conditions reasonable?
17. If the franchisor requires you topurchase proprietary inventory, is that inventory useful?
18. If the franchisor requires you to meetannual sales quotas, are those quotas reasonable?
19. Does the franchisor help with siteselection, lease negotiations and store layout?
20. Does the franchisor provide ongoingtraining?
21. Does the franchisor provide financing?
22. Does the franchisor sponsor anadvertising fund to which franchisees contribute?
23. Are the franchisor’s promotionalprograms strong?
24. Does the franchisor have favourable nationalcontracts for goods and services
Risk Management Checklist
Make sure your business is equipped to rise up from the ashes.
When an air-conditioner unit at software company ESET’s office caught fire at 3:00 one morning, it set alight a cardboard box that was on the floor, as well as the carpet. Not much else was burned, but the carpet produced an enormous volume of smoke and soot, which covered the entire office – and everything in it – in a layer of black filth. The fire also burnt right through the company’s telephone lines, Internet connection and network.
ESET’s servers and Internet lines were back online by 11:00 the same morning so business could continue, but the phone lines were repaired on the following day only; all workstations were completely unusable and the entire office team had to be moved to a temporary location while a cleaning team was brought in to remove the mess.
“We had to reroute our phone lines and network,” says Justin Stanford, CEO of ESET. “All telephone handsets and PCs had to be cleaned before they could be moved out and used.” It took a few days to have the new temporary office rigged up and fully operational as the logistics of relocating were challenging.
Although it’s hard to look on the bright side when your business is dealt this type of blow, ESET was fortunate that its servers were not affected by the fire and no data was lost. To protect its information from this contingency, Stanford explains, the company’s crucial data is backed up hourly off-site, with all other data backed up daily.
Ask Stanford what he and his team have learnt from this experience and he will tell you that ESET needs to improve its fire detection, prevention and active suppression systems. “We also have to make sure that our business insurance and continuity cover are in line with our growth, which means checking the policies regularly. The first step is to acknowledge that something can and will go wrong, and then to plan for it.”
Risk Management Checklist
As risk can be managed but never ruled out, a business strategy for surviving serious fires is vital. Here is a fire risk checklist:
- What are the potential fire hazards inherent to your location?
- What fire protection measures do you have in place and how are they activated?
- How would damaged or destroyed equipment affect your operations?
- Do you have a contingency plan in case a fire completely destroyed your premises?
- What mission-critical data and equipment merits more stringent protection?
- Always insure for 100% of the business value and for the replacement of property lost at the current value.
- Have an independent evaluation of the business by an assessor each year and adjust coverage.
- Business interruption insurance protects your business from loss of revenue accompanying a fire and any potential relocation costs. It’s a separate policy and should be considered if your business could be destroyed by being closed.
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