Considering auto body franchising? consider this before you ink. . .
Franchising isn’t for everyone, forewarned is forearmed, so follow these points and you'll be more prepared to ask the right questions before you commit.
• Know exactly what the start-up and reoccurring monthly fees are. Ask for them in writing.
• Are there additional fees for belonging to a regional business group or 20-group? Is participation mandatory?
• Are royalty payments assessed? What’s the percentage?
• Are there additional fees for participating in corporate (the franchisor) sponsored marketing programs, or are all marketing programs/initiatives included within your monthly fees?
• If the franchisor has an insurance and/or marketing department – are there any reoccurring fees to support the initiatives of these departments?
• If corporate insurance programs are available – are you guaranteed placement on any insurance programs?
• What if you elect not to participate in available corporate insurance programs, are you still a good fit for the franchise?
• If facility image branding (re-modeling) is mandated, make sure you know the time frame for compliance and the average cost of re-branding for a similar size facility.
• Are there any mandated fee-based training requirements your business must adhere to? What is the compliance time frame; and approximate cost of compliance - based on your business headcount?
• Are there any mandatory/proprietary software obligations? Additional fees? Potential hardware or software conflicts?
• If part and/or vendor rebate programs exist, what percent of rebates go back to the company and what percentage goes to you? Are rebates paid monthly or quarterly? How are they processed?
• Will your participation (or lack of) in a corporate vendor program (i.e., paint, part, etc…) effect the rebate percent of other franchisees or the franchisor?
• Is there a “suggested” or minimum staffing headcount criteria to qualify as a candidate?
• If any “highly suggested” tools or equipment (such as computer measuring, tool carts, or laser printer) are mentioned, what is the expected cost for this equipment?
• Is participation in an annual corporate conference mandatory? Is any percentage of these fees built into the monthly fee structure? If fees are included, are you reimbursed if you elect not to attend conference, or do you forfeit the money?
• Do you plan on being in the business every day? Some franchisors mandate owner/operators must be on premises every business day.
• Are there minimum net worth requirements for candidate consideration?
• Who promotes your new franchise? If the answer is you do, what are the anticipated costs?
• Is there field support (regional/district service manager) for your business? What is the minimum visit requirement? Will the support staff you are assigned have the credentials and experience to consult on the unique challenges of your business? (i.e. If your business focus is on production, are you assigned a field support member whose strength is administration?) Ask to review the Bio. of your field support staff.
• Lastly, ask how many businesses were added to the franchise system and how many businesses left the system in the past 48 months. Request a current list of all businesses that have left or have been removed within the past 48 months and do your due-diligence by calling on some. A list of
non-current franchisees is typically provided within the highly-regulated franchise disclosure document package (FDD – sometimes called a UFOC) – make sure your list is current to the month.