Top 10 Checklist for Evaluating a Franchise
Investing in a franchise can provide a great return. However, before jumping into a franchise, review this top 10 checklist for evaluating a franchise:
1. Check the Franchise Disclosure Document ("FDD") – Franchisors are required by federal law and many state laws to give you a copy of their Franchise Disclosure Document ("FDD") at least 14 business days before you pay any money or sign a franchise agreement. The FDD contains important required disclosures that will help you evaluate the franchise. Once you've been granted access to level 3 of this portal, you're provided with the FDD. See Legal Documents.
2. Check The Franchise Agreement ("FA") – The franchise agreement is the contract between the franchisor and franchisee and controls the relationship. The franchise agreement should match the disclosures made in the FDD. Read it carefully to be sure there are no surprises. Once you've been granted access to level 3 of this portal, you're provided with the FA. See Legal Documents.
3. Check With The State You're Interested In Opening a Click IT Franchise Store – Check the status of the franchisor with the State. In 15 states around the country, franchisors must first register and be approved before selling franchises within the state. Click IT has registered and is continuing this process so that the franchise will be able to be sold in all 50 states. Please check the current status here.
4. Check Our Financials - Click IT's FDD contains financial statements. Review these financials carefully and share them with your CPA. The strength of Click IT's financial condition is also reliant upon the income produced by the company store, so attention should be given to this financial statement as well. Click IT has the resources to support its franchise network properly. See our item 19.
5. Check Item 3 In The Franchise Disclosure Document - Click IT is trouble-free which is confirmed in Item 3 of the FDD which contains a 10-year history of any lawsuits against the company. There is no history of litigation which means that franchisees are satisfied with the franchisor. See our Item 3.
6. Check The Number Of Dropouts – Item 20 of the FDD contains information regarding the number of franchisees that have left the franchise in the past three years. Since Click IT is an emerging franchise, there are no dropouts at this time. At Click IT we try hard to make sure franchisees are satisfied with their investment. See our Item 20.
7. Check The Earnings Claims – Check Item 19 in the FDD. A franchisor is legally obligated to provide potential franchisees with an earnings projection, proformas, and statements about how its franchise stores have performed, and such information is included in writing in the FDD. Even though Click IT is a young franchise, we still have historical information financial statements we share with franchise candidates and so the company does not decline to discuss potential earnings, revenues, or profits as many other franchisors do. Only about 25% of franchisors provide earnings claims. Click provides this information openly. See our item 19.
8. Check The Economics – As a franchisor, Click IT does not require you to sell any of our products. This helps to make sure the economics of the offer is viable. Can you sell at a profit and still be competitive in your market? With Click IT, no matter what, we believe you can and show you how by showing you how we've done it ourselves for 10 years. We will invite you to ask other franchisees whether our pricing schema has worked for them in practice. They are able to set their own process and chose their own supplier, so the obvious answer will always be "yes".
9. We Encourage You to Check With Our Other Franchisees – The FDD contains the names and contact information of our franchisees. Call as many of these folks as you'd like and ask them questions regarding their experiences with Click IT. Don't be shy about asking them about their financial performance. While they are not legally bound to tell you, most of the time they are happy to share information with new franchise owners.
10. Check Your Gut – After checking the items in 1-9 above, what does your gut tell you about this opportunity? Are you still excited about it? Or does your gut tell you that there may be problems? We encourage all our candidates to do thorough due diligence before entering into our agreement. Trust your gut.
We encourage you to find a lawyer and accountant who are experienced in franchise documentation, and franchise business models and can help you make the right decision. They can help you properly evaluate the Click IT franchise opportunity. Many professionals offer a flat fee for these types of services.