How to evaluate franchise chain system

Editor's note In order to prevent failure after joining, necessary prior evaluation is indispensable.

Looking at franchise chain

franchise chain is often a shortcut to success. However, 5% (about 25,111 stores) in the United States still close down every year, and there are many well-known chain stores in China, which make franchisees regret the closure due to imperfect operating mechanism and poor capital turnover. Therefore, before entering the system, we must carefully consider the following six questions:

First, how to start the franchise relationship

Most of the franchise relationships are generated from existing enterprises. When the owners of an industry independently develop to two or three stores, they usually consider using other people's funds to expand their enterprises. By developing the franchise system, an independent owner is allowed to use his specific trademark, product, service or comparison system, and a franchise relationship will arise. The franchiser collects the fees stipulated in the franchise fee and the term royalty.

second, what is the potential of joining the market

joining the chain is a means for the growth of the business community at present. In 1991, there were 541,111 franchise stores in the United States, with a turnover of 757.8 billion yuan, accounting for nearly one-third of the total retail sales in the United States, and the number of employees was as high as 8 million. It was predicted by John Nesby, the author of Megatrends, that the turnover of franchise markets in the United States would reach 51% by the year 2111, which shows that the development prospect of franchise business is promising.

Third, how to become a franchisee?

the first step of joining is to confirm the relevant status of each joining system. It is necessary to evaluate and analyze the quality of each joining system, select the one with the best conditions for personal needs, and then directly contact the enterprise to collect information about joining profiles, manuals and so on, so as to judge whether it is suitable for joining.

IV. What should I know before joining

Before joining any system, franchisees should contact franchisees and existing franchisees. When contacting the franchiser, the following information should be requested:

(1) Competition among the same industry

(2) List of various fees payable for joining (franchise fees, royalties and advertising fees). . . Etc.)

(3) qualifications of the franchisee (age, education, financial resources, location. . . Etc.)

(4) Initial investment cost (decoration, equipment, purchase. . . Etc.)

(5) Conditions and rights of suspension or transfer

(6) Contents of the contract (term, joining fee and royalty). . . Etc.)

When visiting the existing franchisees, please ask them to provide the following information:

(1) Profitability

(2) Cooperation between franchisees and franchisees.

(3) Investment status

(4) Frequently asked questions (delivery, advertising, counseling. . . . Etc.)

In addition, you should also take time to consult a lawyer about legal matters involved in the contract for future needs.

5. How much do new franchisees usually have to pay

The investment cost of joining is usually not low. In the United States, the initial joining fee ranges from US$ 5,111 to US$ 35,111 due to different industries. The monthly royalty is about 3-7% of the monthly turnover, plus the advertising fee of about 3% of the monthly turnover. In addition, franchisees sometimes have to pay 3-8% of the monthly turnover as rental fees for equipment and land. The total start-up cost of joining is about US$ 8,111-411,111.

VI. Will the new joining be successful?

Joining cannot guarantee 111% success. However, according to the report of the small and medium-sized enterprise management department of the U.S. Department of Commerce, from 1971 to 1987, less than 5% franchised stores closed down, but 65% small independent stores closed down within five years. Therefore, as long as the new franchisees have strong ambition, good health, good morality, sufficient funds, and the management technology of the franchise system, it should be promising to run a successful franchise store.

2. How to evaluate the franchise chain system

If you want to enter the franchise chain industry, you must never be confused by its appearance. You must carefully evaluate the franchise chain system to avoid making mistakes and complaining repeatedly. Past examples show that some franchise chain systems with good image or due to various reasons such as financial crisis, credit expansion, failed investment transfer, etc., pigs and sheep changed color overnight, from the peak to the bottom, and as far as the impact is concerned, they are the franchisees who are constantly wrong and speechless.

before joining, you must know clearly what your starting point is. Is it a well-known trademark focusing on franchise chain headquarters? Or does it take a short time to develop franchise stores? Is it planned to accumulate management experience quickly and effectively? The expectations of these franchisees in advance may not be consistent with the benefits provided by the headquarters, so if we can consider meeting the biggest needs of franchisees, we can reduce the occurrence of complaints in the future.

After statistics, the benefits of participating in franchise operation can be summarized as follows:

1. Franchise system can provide well-known brands that attract customers.

2. It takes a short time to develop franchise stores.

3. The franchise system provides the verified business operation formula.

4. management experience is accumulated quickly and effectively.

5. you can receive training to increase the possibility of success in running your own business in the future.

6. There is greater job satisfaction than being paid for employment.

7. It is less risky than operating independently by individuals.

8. Enjoy lower purchase cost

9. Have more independence than getting paid by employment.

11. through the joining system, the business is easier to expand.

11. The trend of the times can avoid being eliminated.

12. Compared with independent operation, the investment is less and easier.

13. The cost of opening a franchise store is lower than that of an independent store.

14. Participating in franchise is more profitable than independent operation.

There are different opinions on the methods of evaluating franchise chains, among which four evaluation items proposed by IFA are the most valuable. That is, first, financial performance, second, the company's growth and management quality, third, the company's stability, and fourth, the quality of getting along with franchisees, which can be divided into the attitude and service of franchisees, and the evaluation of franchisees and franchisees.

The top 25 franchisees in the recent 3,111 different industries in the United States are evaluated according to the above four items, and the most important one is the relationship between the franchise headquarters and franchise stores. The so-called good beginning is half the battle. If we can be clear about the problems presented by the existing franchise system, instead of holding too high expectations, the disappointment rate can be relatively reduced. The problems presented by the existing franchise system are as follows:

1. It is difficult to maintain standard and consistent procedures and controls in the franchise system.

2. The profit situation is not as ideal as expected,

3. Franchisees rely too much on franchisees.

4. The franchise system lacks suitable franchisees

5. Stores lacking suitable site conditions

6. Franchisees are forced to purchase goods from specific suppliers

7. The government has not yet made legislation, which has caused operational confusion.

as for the growth, management quality and financial performance of a company, how long it can survive can be judged by its operating conditions. Only a growing company can maintain its product innovation and competitiveness, while the stability of the company can be found through newspapers and magazines or by manufacturers. A chain system with unstable stores, high turnover rate, red financial light and insufficient confidence index of franchisees is bound to be loose and loose. As long as franchisees spend more time and effort to inquire beforehand, they will be free from the fear of future cooperation.

The further franchise chain system evaluation project is provided here as a reference for joining the main diagnosis chain system to manage physical fitness.

1. comprehensive evaluation: (1) products or services, (2) chain scope, (3) existing stores, (4) reasons for the closure of franchisees, (5) development trend of new products and services, (6) competitive situation, (7) distribution pattern of franchisees and (8) content of franchise conditions.

2. franchise chain Headquarters: (1) Name and location; (2) Is it a listed company? (3) If it is not a listed company, what is the credit status of the person in charge?

iii. finance and law: (1) expert consultation-law, finance, operation and management; (2) analysis of joining cost-starting capital, expenses paid to the head office, and those expenses can be refunded? (3) financial support-does this department provide funds to franchisees? What is the interest rate?

iv. education and training: (1) initial training-period? Cost? Training courses, (2) follow-up training-training courses? Cost?

v. marketing: (1) how to sell products or services? (2) How to obtain the sales guide? (3) Who are the target customers? (4) What is the advertising budget of this department? -Budget, media, and (5) What kind of advertising promotion will be provided to the franchisees?

VI. Assistance from the headquarters: (1) Who are the operators and managers? (2) What service departments are there? (three) whether there is a person to assist in business guidance?

in addition, American manufacturers also put forward a set of check items on cooperation.

1. how much royalty does the franchisee have to pay?

second, can franchisees obtain the technology of species conservation?

3. how much investment does the franchisee have to pay?

iv. can franchisees accept the management rules of the headquarters?

5. The degree to which franchisees can control their operations (such as raw material procurement and sales quota) 1

6. What is the market value of products provided by franchisees?

7. What is the public's awareness of joining? What is the external reputation?

8. Does the headquarters provide advertising?

9. what services can the affiliate headquarters provide to the franchisees? (e.g. business circle investigation, training, maintenance, etc.)

X. Policies and conditions of the franchise headquarters for ending the cooperative relationship with the franchise stores.

11. The frequency of the franchise headquarters terminating the contract or not renewing the contract with the franchise stores.

xii. Past legal records of the franchise system.

XIII. Time limit for joining cooperation.

XIV. Evaluation of the failure probability of joining cooperation.

XV. Are there any differences in the policies of franchise headquarters for direct stores and franchise stores?

XVI. policies of the franchise headquarters on selling goods in franchise stores.

XVII. policies of the franchise headquarters on maintaining the business circle of the franchise stores.

XVIII. Profitability in the first year and the fifth year after joining.

after introducing several chain system evaluation projects, the most important thing is to know more, compare more and make more preparations in advance, so as to avoid becoming a failure in joining.