It's one of the most important tools you'll get when buying a franchise - and the foundation of your relationship with the franchisor.

The Franchise

Did your lawyer approve the franchise contract you are considering after he or she studied it paragraph by paragraph?
Does the franchise call upon you to take any steps which are, according to your lawyer, unwise or illegal in your state, county or city?
Does the franchise give you an exclusive territory for the length of the franchise or can the franchisor sell a second or third franchise in your territory?
Is the franchisor connected in any way with any other franchise company handling similar merchandise or services?
If the answer to the last question is "yes," what is your protection against this second franchisor organization?
Under what circumstances can you terminate the franchise contract and at what cost to you, if you decide for any reason at all that you wish to cancel it?
If you sell your franchise, will you be compensated for your goodwill or will the goodwill you have built into the business be lost by you?

The Franchisor

How many years has the firm offering you the franchise been in operation?
Has it a reputation for honesty and fair dealing among the local firms holding its franchise?
Has the franchisor shown you any certified figures indicating exact net profits of one or more going franchises which you personally checked with the franchisee(s) noted?

Will the firm assist you with:
A management training program?
An employee training program?
A public relations program?
Capital? Credit?
Merchandising ideas?
Will the firm help you find a good location for your new business?
Is the franchisor adequately financed so that it can carry out its stated plans of financial assistance and expansion?
Is the franchisor a one-person company or a corporation with an experienced management team trained in depth (so that there would always be an experienced person at its head)?
Exactly what can the franchisor do for you that you cannot do for yourself?
Has the franchisor investigated you carefully enough to assure itself that you have the managerial, financial and business talents necessary to successfully operate one of its franchises at a profit?
Does your state have a law regulating the sale of franchises and has the franchisor complied with that law?

You—the Franchisee

How much equity capital is required to purchase the franchise and operate it until your income equals your expenses? Where are you going to get it?
Are you prepared to give up some independence of action in order to secure the advantages offered by the franchise?
Do you really believe you have the innate ability, training and experience to work smoothly and profitably with the franchisor, your employees and your customers?
Are you ready to spend much or all of the remainder of your business life with this franchisor, offering his product or service to your public?

Your Market

Have you made any study to determine whether the product or service which you propose to sell under the franchise has a market in your territory and at the price you will have to charge to generate a profit?
Will the population in your exclusive territory increase, remain static or decrease over the next 5 years?
Will the product or service you are considering be in greater demand, about the same demand, or less demand 5 years from now.
What competition already exists in your territory for the product or service you contemplate selling?
Non-franchised firms?
Franchised firms?

Reprinted from an article by the U. S. Department of Commerce, Minority Business Development Agency
Source: FranchiseInfoSite.com