Evaluate A Franchise Opportunity In 10 Simple Steps

A good deal of information has been written and published about how to evaluate a franchise opportunity. Whether one is an individual or represents a private equity firm, it’s important to be able to evaluate and vet a franchise before conducting a full-scale analysis. The following is a way to do an initial franchise review, before investing a lot of time and money.

To perform this 10- step review, you’ll need a copy of the Franchise Disclosure Document for each franchise you’re evaluating. An FDD can be obtained from the franchisor and the’re available from certain Franchise Registration States or can be purchased from franchise vendor sites.  If the decision is to pursue a specific franchise opportunity, a complete and detailed evaluation should follow this 10-step preliminary review, which should include utilizing legal and financial professionals with franchising experience.

Following are 10 preliminary steps for evaluating a franchise opportunity:

1. Franchisor Management-review the management background and experience of key franchisor executives and support staff. It’s important that they have experience in the business sector and franchise industry. Franchisor leadership should have a cross section of business skills and experience.
2. Franchisee Territory-The territory should be defined in a consistent manner and allow for franchisee growth. Verify if the franchisee territory is Exclusive, Protected or Open. Franchisors that grant small open territories can result in conflicts among neighboring franchisees as some franchisees will be more aggressive than others. There is also the potential for a dispute with the franchisor over the territory.
3. Franchisee Fees-identify if the franchisor charges other fees for services above and beyond any royalty and ad fund fees. Additional continuing fees for software usage and licensing fees, when added to royalty and ad fees will increase expenses. Be sure that the initial franchise fee and the continuing fees are comparable to similar franchises.
4. Item 20- review the growth of new franchisees and compare to franchisee terminations. This number will reveal net franchisee growth and prevent one from seeing misleading data. Also, the number of Franchises Sold But Not Opened can indicate if the franchisor is devoted more resources to selling franchise versus the growth and development of existing franchises. The tables in Item 20 contains information which can indicate positive or negative performance results.
5. Financial Statements– Unless the franchisor is a start-up there should be three (3) years of audited financials available. Look for a continuing and growing stream of revenues from franchisee royalties. Initial franchise fees should not represent the preponderance of revenues unless it’s a start-up.
6. Required Suppliers and Rebates– Does the franchisor requires purchases from specific vendors? Compare that information to the data in Item 8, which shows the percent of purchases from the franchisor and other vendors and suppliers. In addition, does the franchisor receive rebates from vendors and suppliers and if yes, how much? Many rebates from required franchisee vendors could compromise the trust between a franchisor and its franchisees.
7. Intellectual Property-Does the franchisor have any confidential, proprietary information or trade secrets that distinguishes the franchise from the competitors? Check Items 13-14 of the FDD to determine how unique the system is, and whether the franchisor has a comparative advantage over its competition.  Also, does the franchisor have the marks trademarked?  Make sure that the franchisor properly and legally controls the brand name, and there is no potential dispute over ownership of the marks.
8. Item 19-it’s important that the franchisor makes a Financial Performance Representation under Item 19. Any established franchisor should make an Item 19 disclosure. The more detailed the financial information the easier to evaluate franchisee performance and make financial projections. If the franchise is a startup there should be financial data for company locations.
9. Franchisor Litigation- franchisor-franchisee litigation is a barometer of the state of franchisee- franchisor relations, is it positive or negative? Has the franchisor acted to protect its system and brand or is it a case of franchisees having disputes with the franchisor, because they are not receiving support or meeting their financial expectations? Some medium to large franchisors report no litigation while some smaller franchisors may have had many legal disputes. The amount and source of litigation is an area that should be reviewed since it be can be a red flag.
10. Franchisor Training Programs– Franchisee training should be comprehensive and presented by more than one person. Training that includes a portion of onsite training for new franchisees provides real world franchise experience that the classroom can’t duplicate.

Whether you’re a multi-unit franchisee, an individual franchise candidate or a representative of a private equity group these 10 steps will allow you to perform a preliminary franchise review. Although a first step in the franchise evaluation process, it can provide an overview of a franchise investment opportunity at minimal cost and expense. If you decide to proceed with a specific franchise opportunity, be sure to utilize an accountant and franchise attorney to guide you along the way.

Source: Forbes

8 years ago Newsroom

How Dubai plans to make itself more beautiful

The Government of Dubai Media Office’s creative arm, Brand Dubai, has signed an agreement with the Roads and Transport Authority (RTA) to undertake beautification projects across the city over the next three years.

Under the agreement, the two organisations will implement public art projects aimed at enhancing the city’s aesthetic environment.

The beautification projects will cover bridges, tunnels, walking tracks, bus stops and other public facilities and areas throughout Dubai.

Accomplished artists from the UAE, the region and across the world will be invited to create public artworks that will transform the ambience of urban spaces in Dubai.

Mattar Al Tayer, director general and chairman of the RTA, said: “We are very happy to partner with Brand Dubai to execute this unique urban beautification project in Dubai. RTA is committed to working with diverse partners to enhance the urban experience that Dubai offers both to residents and visitors. RTA is also keen to ensure that all its projects incorporate an aesthetic dimension.”

Mona Al Marri, director general of the Government of Dubai Media Office, added: “The collaboration with RTA to launch beautification projects across the city is aligned with the vision… to turn Dubai into an open-air museum that celebrates art, creativity and aesthetic excellence.”

Under the terms of the MoU, both parties have agreed to set up joint teams to manage the planned projects. Projects are grouped under two initiatives launched by Brand Dubai – Dubai Art Museum which focuses on creating mural artworks across the city, and Dubai Speaks to You, which aims to create public artworks.

Source: Arabian business

8 years ago Newsroom

VAT refund for tourists will help hospitality and retail

The duty of financially supporting a country’s government and infrastructure should belong to its citizens and residents. It should not belong to tourists.

This is what makes last week’s decision by the UAE Cabinet to allow tourists to receive a refund on the 5 per cent value-added tax (VAT) they pay for goods an services such a critical one. The decision moves the burden of taxes back to those who live here and removes an obstacle that has impacted the UAE’s tourism and hospitality industry.

But the decision to allow refunds, which will be overseen by an international firm that specialises in tax recovery services, linking retail outlets and designated tax refund points, isn’t the final step. If the UAE is truly to implement international best practices regarding VAT, the country’s hotels and retailers, which includes everything from restaurants to theme parks, must ensure that they are conversant in all VAT regulations and procedures that enable tourists to avoid any inconvenience in recouping their money.

This should be an easy adjustment for the country’s hotels. Many of the county’s biggest hotels are managed by international chains that will have experience in meeting regulatory compliance. Local chains will need to ensure they do not lag behind in implementing VAT refund procedures or they will face an economic disadvantage from consumers looking to stretch their holiday pounds, euros, rupees and dollars in the current economic climate.

Retailers in particular will need to ensure a timely implementation across all sectors. While the government was forgiving in the implementation of VAT by companies due to their lack of experience in dealing with tax regimes, international tourists will not be so patient with their refunds, especially if the refund had been a factor in their choosing the UAE as a destination.

Some companies of course will be faster in figuring out these new regulations, but time is of the essence here. In a world where tourism and consumers in general can check prices and reputations with a quick online search, retailers who fail to offer VAT relief fast and efficiently enough will likely face a backlash.

This cannot be allowed to happen as the bad reputation of a few companies could result in a negative impact on the UAE’s hospitality and retail industry overall, which would be difficult to fix in today’s hyper-critical cyber environment. The Federal Tax Authority needs to instruct and push companies to implement the new rules quickly and accurately.

 

Source: gulfnews

8 years ago Newsroom

Join MENAFA and extend your business in KSA

As it continues to pursue high-quality services, the Middle East and North Africa Franchise Association (MENAFA) encourages its valued Clients and Associates to be featured at Monshaat Website by the General Authority for Small & Medium Entities – a government entity in the Kingdom of Saudi Arabia which was established to support Saudi SME’s and investors to grow their business and to participate in the development of the local economy through developing  their ideas and products.

www.monshaat.gov.sa

MENAFA strongly believes that this is a one-of-a-kind opportunity to have its Clients’ brand be shown to Saudi audience for awareness, thereby attracting more potential investors and clients for their businesses.

 

By signing MENAFA’s Marketing Agreement, interested brands will have the opportunity to boost growth and expansion opportunity.

For more details, please send an email to info@menafa.com, or call +971 4 423 7799.

8 years ago Newsroom

Join the 2nd BFDEX and be a MENAFA Member!

دعمًا  لأزدهار نشاط الامتياز التجاري المتنامي بمملكة البحرين، تقوم جمعية الشرق الأوسط وشمال أفريقيا (مينافا) بتنظيم معرضها الثاني للامتيازبمملكة  البحرين في الفترة من 7 إلى 9 نوفمبر 2018 بمركز البحرين للمؤتمرات

وتشجع مينافا أعضاء الجمعية والمستثمرين المحتملين على المشاركة في هذا الحدث المميز في مملكة البحرين لإتاحة الفرصة لعرض منتجاتهم أو خدماتهم والتواصل مع زملائهم من المستثمرين والمتخصصين في الأعمال لمزيد من الفرص التجارية خاصة في مجال منح الامتيازات التجارية

بالنسبة للمهتمين بالمشاركة لعرض إمتيازاتهم التجارية بهذا المعرض  تقدم مينافا خصما قدره 25% علي الرسوم السنوية لعضوية جمعية مينافا  وبغض النظر عن المشاركة في هذا الحدث الرئيسي المتميز ، ستتاح الفرصة لهم أيضا ليكونو أحد الأعضاء المتميزين في أكثر الجمعيات تميزا بمنطقة الشرق الأوسط وشمال إفريقيا

In support to the booming franchise industry in the Bahrain, the Middle East and North Africa Franchise Association (MENAFA), co-organizes the 2nd Bahrain Franchise and Dine Expo to be held on 7 to 9 November 2018 at Bahrain Conference Center.

MENAFA encourages its associates and potential investors to participate in this franchise event in Bahrain to have the opportunity to showcase their products or services, and network with fellow investors and business professionals for more business opportunities particularly in franchising.

For interested exhibitors, MENAFA offers 25% off on MENAFA Membership Fee, so aside from being a part of the premier franchise event, participants will also have the opportunity to be one of the elite members of the most distinguished franchise association in the MENA region.

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