20 Questions To Ask A Franchisor Before Buying A Franchise
If you think about acquiring a franchise, then it might be a good idea to learn everything possible about the brand you want to become a part of. Franchise business model is a great choice for entrepreneurs that dream of having their own business and earning good profits. It is a rewarding but sometimes challenging business venture that requires determination, knowledge, a lot of effort, and funds. It is better to enter the franchise agreement well-prepared and informed. In this article, you will find some common questions to ask a franchisor before acquiring this or that franchise.
Questions for franchisor about the franchise system
How long have you operated?
Learn how much experience the franchisor has in the industry. It is better to invest in companies that have years of operation and a well-established business model that have proved to be working perfectly well.
How was your brand founded?
When you know the history of the brand, you understand its values, message, and goals better. So, you can determine whether you share similar interests, and whether you will be a good fit for each other.
How are you different from competitors?
There are numerous brands that offer similar products and services, so it is important to find out how the franchise of your choosing stands out from the competition. It may be the kind of service, design of products, prices, loyalty system, and much more. Learn what exactly makes the brand different.
What are your expectations from franchisees?
Typically, franchisors have an idea of a perfect candidate. Inquire what exactly they are looking for in a potential franchisee, learn what are their requirements. Some franchisors expect their franchisees to have prior experience in the industry, others look for candidates with certain skills and knowledge. Learn what their ideal candidate is, so you can determine whether you meet the criteria.
What do you offer to franchisees?
Ask what is included in the franchise package, what you’ll be getting for your money. What kind of assistance, support, and training you’ll receive. Learn how the franchisor is involved in business processes, and how different aspects are handled.
Questions related to franchise fees and expenses
What is the amount of investment?
Typically, the parent company shares the approximate amount of initial investment required for setting up a franchise. Ask if it's possible to contact existing franchisees to get a better idea of financial requirements. The amount can differ depending on many factors. Ask what factors can influence the sum.
What is the investment made up of?
It is essential to comprehend how much money has to be invested and for what purposes. The initial investment can be made up of payments for equipment, insurance, inventory, supplies, licenses. Entrepreneurs need to understand expenses in order to be prepared for them.
What kinds of fees do you require?
There are different kinds of fees that brands require. Usually, it is a royalty and advertising fee. However, there can be other fees. So, it is crucial to learn all about fee requirements.
How long is the expected return of investment?
Each brand stipulates various terms for return of investment. Typically, it is approximately 1–2 years. It can be shorter or longer, depending on the brand.
What associated expenses can I expect?
There is usually information about required investment in the open access. However, not all expenses can be addressed. So, it is important to learn what potential expenses can appear from the franchisor. It can be helpful to contact former or existing franchisees to find out this information from the people who experienced it firsthand.
How much can I earn?
Generally, the franchisor does not disclose information about the individual franchise owner’s income. However, he or she might give you an idea of what you can expect on average. Some brands are more open about financial prospects than others.
Questions about training and support
What kind of support do you offer?
Support is very important, especially for novice franchisees. Ask what kind of support system the franchisor provides, whether it is ongoing or partial. Parent companies that offer comprehensive assistance and guidance have more successful franchisees than those that do not.
What kind of training do you offer?
Training is a significant aspect of a franchise relationship. Entrepreneurs that do not have prior experience in a particular industry especially count on training provided by franchisors. Find out whether the brand provides training, where it will take place and its duration.
Do you help with recruitment?
Almost every franchise requires certain staff. Ask if the franchisor helps with hiring and retaining employees.
What kind of marketing support do you provide?
Promotion is crucial for a franchise, especially during the grand opening. Find out what marketing programs the franchisor offers.
Questions about franchise agreement
What will my responsibilities be?
Typically, the duties of both the franchisor and franchisees are stipulated in the items of the agreement. But if some responsibilities are not clear, you can ask any questions to be certain.
Do you offer exclusive territory rights?
Most brands provide franchisees with exclusive territory, so there are no competitors of the same brand in the area. Ask if it is available.
What are the terms of agreement and fines for its violation?
Learn more about the terms of cooperation and what are the penalties for breaking.
Questions about the franchisor's financials
How financially successful is the brand?
Ask if the franchisor has ever filed for bankruptcy, or have had any financial troubles. Even if there were such precedents, learn how they were handled. Typically, the franchisor shares the information about the financial performance of the brand.
Did you have any legal disputes, and how were they handled?
Find out if there were any legal disputes or financial disturbances with the brand. Learn how the franchisor deals with such problems. Properly managed disputes are a sign of adequacy and professionalism.
Carefully review all available information about the franchise system that you’re interested in, and look at the questions to ask a franchisor listed above in order to be well-informed. Starting a franchise is a serious decision that cannot be taken lightly. Thoroughly research franchise options and analyze your own interests, so you can make the right decision for you.
Founder of Topfranchise.com
CEO Expedition 2009 - 2014
Author of a book «GROW WITH A FRANCHISE»