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Questions to Ask a Franchisor When Buying a Franchise

Written by: Peter Casey

Article Overview: So buying into a franchise system seems to make a lot of sense for those who want to be in business for themselves but not by themselves. But how do you know what questions to ask franchisors as they present their franchise system to you with the ultimate goal of asking you for a commitment to join? These questions are a start and the franchisors' willingness to answer them should help you gauge their sincerity.

Questions to Ask a Franchisor When Buying a Franchise

Those with an entrepreneurial spirit and seasoned business owners agree that franchises hold great advantages over independently owned businesses. So many of the "back office" concerns have been developed, tested, refined, and often even perfected. Most independent business owners can't devote the time or resources to compete with the operational and marketing systems that franchised models provide.

So buying into a franchise system seems to make a lot of sense for those who want to be in business for themselves but not by themselves. But how do you know what questions to ask franchisors as they present their franchise system to you with the ultimate goal of asking you for a commitment to join? This commitment involves signing a contract and a check.

Some basic questions are:

What is my total estimated cost to open?

Does this amount include working capital?

How many franchised units (stores or outlets) have failed and why?

How many people signed up with your franchise and were never able opened?

Who are the competitors and why would I choose you over them?

Do you provide any guidance, in writing, about what I can potentially earn?

What is my territory and how is it protected?

Do franchisees have a say in how our advertising dollars are spent? (Many franchises have an "Ad Council" made up of franchisees)

How does the franchisor make their money?

What materials or services am I required to buy directly from the franchisor?

These questions are a start and the franchisors' willingness to answer them should help you gauge their sincerity. The existing franchisees are often a more productive group to speak with. The existing franchisees-just like you-went through a research process with the franchisor and now are either reaping the rewards of franchise ownership or regretting their decision. You'll find that they are usually very willing to provide you with their thoughts, regrets, and opinions.

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Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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