@117 CHAP 3

        ÚÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ¿
        ³      CHECKLIST FOR EVALUATING A FRANCHISE     ³
        ÀÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÙ

@Q     "Promises are like pie crusts; they are made to be
@Q      broken." -- Mao Tse-tung

(A)  THE FRANCHISE:

    . Did your lawyer approve the franchise contract you
      are considering after he studied it paragraph by
      paragraph?

    . Does the franchise call upon you to take any steps
      which are, according to your lawyer, unwise or il-
      legal in your state, county, or city?

    . Does the franchise give you an exclusive territory
      for the length of the franchise or can the fran-
      chisor sell a second or third franchise in your
      territory?

    . Is the franchisor connected in any way with any
      other franchise company handling similar merchan-
      dise 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 fran-
      chise contract and at what cost to you, if you de-
      cide 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 you lose the goodwill that
      you have built into the business?

(B)  THE FRANCHISOR:

    . For how many years has the firm offering you a fran-
      chise been in operation?

    . Does it have a reputation for honesty and fair deal-
      ing among the local firms holding its franchise?

    . Has the franchisor shown you any certified figures
      indicating exact net profits of one or more going
      firms which you personally checked yourself with the
      franchisee?

    . 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 franchising firm adequately financed so that
      it can carry out its stated plan of financial assis-
      tance and expansion?

    . Is the franchisor a one-man company or a corporation
      with an experienced management trained in depth (so
      that there would always be an experienced person at
      its head)?

    . Exactly what can the franchisor do for you which you
      cannot do for yourself?

    . Has the franchisor investigated you carefully enough
      to assure itself that you can successfully operate
      one of their franchises at a profit both to them and
      to you?

    . Does your state have a law regulating the sale of
      franchises and has the franchisor complied with
      that law?

(C)  YOU--THE FRANCHISEE:

    . How much equity capital will you have to have to pur-
      chase 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 ac-
      tion to secure the advantages offered by the franchise?

    . Do YOU really believe you have the innate ability,
      training, and experience to work smoothly and profit-
      ably 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
      its product or service to your public?

(D)  YOUR MARKET:

    . Have you made any study to determine whether the pro-
      duct or service which you propose to sell under fran-
      chise has a market in your territory at the prices
      you will have to charge?

    . Will the population in the territory given you in-
      crease, remain static or decrease over the next five
      years?

    . Will the product or service you are considering be in
      greater demand, about the same, or less demand five
      years from now than today?

    . What competition exists in your territory already for
      the product or service you contemplate selling?
       - From nonfranchise firms?
       - From franchise firms?

      ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
      Source:  Franchise Opportunities Handbook, U.S.
               Department of Commerce (Washington, D.C.)
      ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ