10 Signs of a Great Franchise

6. Financing assistance. Many franchisees need to finance part of their investment in the franchise business. Though it is quite rare for a franchise company to provide financing directly, a solid franchisor will have "paved the way" for the franchisees. This might be in the form of standardized business plan templates made available for the franchisee or even vendor relationships with prospective lenders that are set up in advance for franchisees.

7. Litigation history. Though it is common for a franchise company, especially if they are well established with lots of franchisees, to have some litigation history, this is something you would like to see minimized. Carefully examine the litigation disclosures in the Uniform Franchise Offering Circular to determine clues about how the franchise company deals with conflict. A pattern of excessive litigation is a red flag for any franchise opportunity.

8. Financial strength of the franchise company. It sounds simple, but a solid franchise company has a strong and profitable financial status. Make sure you examine the audited financial statements in the UFOC (or have them reviewed by an accountant if you're not experienced in this area) to make sure the company is likely to stay in business and meet its commitments to the franchisees.

9. Financial strength of the unit operations. A good franchise company has an opportunity available that allows a typical franchisee to earn a reasonable return from their unit operations within a reasonable period of time. Though this is sometimes difficult or challenging to confirm, it is an essential component of finding a solid franchise company. Spend whatever amount of time and effort is necessary to confirm the unit economics before becoming a franchisee of any company.

10. The attitude of the existing franchisees. This is the most important indicator of a solid franchise company. In a good company, an overwhelming majority of the franchisees are happy with their business. They are satisfied with the training and assistance programs, the marketing efforts, the financial results they are achieving and the relationship they have with the people in the company.

When you find a franchise that scores well on each of these 10 indicators, you have indeed found a solid franchise. Assuming that the opportunity and the franchisee role characteristics fit with what you are looking for, you should be able to achieve success as a franchisee with such a company.