Buying a Franchise

Financial Lessons for Franchisees from Quiznos

money_by_sternenmaedchen87Quiznos is having a tough time. Franchise experts are starting to look askance at the famous toasted sandwich franchise because of recent financial health issues. Business Insider has a laundry list of reasons why the franchise isn’t succeeding right now, starting with the fact that more than half of the stores have closed since the peak number of 5,000 stores. Quiznos also has excessive debt, they’ve missed a loan payment, and they are pursuing restructuring. Experts are saying that things don’t look very bright for the sandwich giant. Some are even wondering if the brand will shutter all its franchises. There’s always the possibility that Quiznos will turn their business around but if you’re looking for a franchise business opportunity right now, it might not be your first choice.

An anonymous source tipped off reporters about a missed loan payment and got Quiznos’s troubles into the news, but you don’t have to wait for headlines. Your research on franchise opportunities should include scrutiny of their financial position. If a franchisor isn’t financially strong, they may not be able to provide the help and resources that franchisees need to be successful.

At the same time, the fact that a franchise company has problems that hit the headlines doesn’t automatically make it a bad choice. Plenty of companies have weathered storms and come through stronger, and sometimes the solution for financial troubles is a brand buyout that benefits franchisees. What’s more, news reports sometimes get the details wrong or tell only part of the story. The key is to get all the information you can so you can make an informed decision about the franchise business opportunities you’re considering.

Information on the financial health of a franchisor can be tricky to obtain, depending on the company. If they are publically traded, you can check into financial health records such as financial statements. You can check the D-U-N-S numbers of companies, too; privately held companies often have these numbers. The D-U-N-S number is an identification number that can help you measure the risk associated with a company. Read more about it at Dun & Bradstreet.

And of course you should scrutinize the Franchise Disclosure Document for any franchise business opportunity you are considering as an investment. However, companies are not required to give a great deal of financial information in this document, and some will not choose to do so. You can always ask questions, though.

Searching through old news article is also another way to look at the financial health of a franchise. One way is to make a list of all the facts and numbers associated with a franchisor and make a timeline to trace the financial history of the franchise. Looking at the data on a timeline can give you a clear picture of the franchise.

If you need guidance when it comes to understanding financial information, an accountant can be a strong resource. If you get any hint that a franchise business opportunity is not financially stable, consider getting some outside opinions before you make your investment.

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