Question added to topic Franchises •
August 14, 2007
How do I evaluate a franchise's chances of financial success?
I have an opportunity to by an existing franchise which has seen tremendous growth and looks almost too good to be true. How can I evaluate both the franchisor and the business itself in order to validate that I can be successful? This is a ServiceMaster franchise in Phoenix involved in disaster cleanup and restoration.
This is the 64 dollar question for all prospective franchisees but you have a huge advantage since you're looking at the purchase of an existing franchise unit with an established track record. Check the historical financial results carefully. Make sure you look at trend data over the past few years and not just how it did most recently - find out if it is still growing and thriving. The company you're looking at has a wonderful track record over a very long term of existence and that should help your confidence. Find more detailed info about buying an existing franchise in the archived articles I've written at Entrepreneur.com.
Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.