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Ask the Expert:
What Should I Look for When Evaluating a Fast Food Franchise?
MODERATED BY JOHN WALSH
Still trying to find the right fast food franchise? This Q&A should help answer some of your questions about how to identify the right opportunity.
Q: What is the best way to start evaluating fast food franchise opportunities?
A: Once you've found a brand that interests you, request the franchisor's UFOC, or Uniform Franchise Offering Circular. Get their financial statements, and start talking to existing and former franchisees to get a better idea of the franchisor's performance. Lastly, run an online search to turn up more information on the franchise. You should be able to find success stories, performance data, and any possible horror stories.
Q: How important is location?
A: Location is very important. A franchise's success in one area does not guarantee it in another. Additionally, find out whether there are similar franchises or existing franchises in the neighborhood you're considering. If so, plan to go elsewhere or rethink your franchise options.
Q: How do I know I'll be any good as a fast food franchisee?
A: First ask yourself these questions:
- Can you follow a system?
- Are you a "people person?"
- Are you good at asking for help (that's what the franchisor is for)?
- Are you willing to work hard?
If you answered yes to all of the above, chances are you have a shot at success in fast food franchising.
Q: What are some other indicators of a good fast food franchise?
A: An excellent indicator of a successful franchisor is the number of new franchises they add each year. If they are adding between 10% and 35% annually they are probably on the right road. If they are really large or small, then look at the number of support personnel. A ratio of one support rep to 10 or 20 franchisees is a good sign. Note: This information won't be listed in their UFOC, so you will have to ask.
Q: Is running a fast food franchise lucrative?
A: Potentially, yes. Fast food is a $125 billion a year industry. However, it will require a high level of commitment on your part and lots of hard work -- particularly in the first year -- to put a chunk of this bankroll in your pocket.