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FAQ's for Starting a Franchise

Written by: Tom Parsley

Article Overview: Here are 11 commonly asked questions that are asked by potential franchise candidates. Note that there are no standard answers for any question. Answers can vary dramatically from one franchisor to another. Please use this as a basic guide.

FAQ's for Starting a Franchise

Here are 11 commonly asked questions that are asked by potential franchise candidates. Note that there are no standard answers for any question. Answers can vary dramatically from one franchisor to another. Please use this as a basic guide.

How much capital do I need?

While the franchisor will give you guidelines, many candidates get hung up on an absolute number that is provided by the franchisor. Just remember this: it usually takes more capital than you would expect to start any business. While a franchisor has the knowledge of many others who have gone before you, please do not underestimate the number.

Do I need to have a good credit score?

Probably yes. Even though you may be able to convince the franchisor that you have sufficient capital, experience, and knowledge to start the business, there will be other related business dealings that will require a good credit standing. Think about trying to open a bank account, trying to borrow money, signing a property lease, etc.

Do I need experience in running my own business?

It varies. Many very basic opportunities require no prior experience whatsoever. In fact, that can become a major advertising pitch for many. Others may require a great deal of experience and business savvy.

Do I need knowledge of my desired industry?

Reference above, once again, this really can vary.

Do I need to use a Franchise Broker?

Absolutely not, franchise brokers can add value however. They can help screen potential franchise candidates. They can also coach you on the proper do’s and don’ts during the application and approval process. Just keep in mind that franchise brokers may only represent a select few franchisors. Online web portals, such as The Business Market, can provide an easy way to search for existing franchise opportunities. They will likely have a very large number of listings relative to what a broker will represent.

Can I operate my business from my home?

Sometimes yes. However most franchise opportunities require a business location. Many are retail related.

How long does it take to open?

Expect the entire process to take anywhere from 60 to 180 days.

What type of training and support do you provide?

Everyone brags about their unsurpassed training and support. The truth is, most do an excellent job of providing proper training. And if you think about it, it is in the franchisor’s best interest to provide ongoing support. If you prosper, then they will prosper through the collection of royalty payments from you. After all, they have their reputation and name on the line.

What is a “Discovery Day?”

A Discovery Day is a day devoted to you at the franchisor’s headquarters. You will spend time with key managers and trainers, learning about systems and how the franchisor will help you succeed in your business.

Will I have a protected territory?

Almost definitely, that is one of the big selling points for any franchisor.

Will I have to pay ongoing royalty fees?

Absolutely, this is the primary reason that any franchisor would want to franchise their opportunity in the first place.

Note that many low cost opportunities are not really franchises, but they are considered Business Opportunities (BizOps). BizOps are very unregulated and usually have a very small entry cost. There are no ongoing royalty fees with a BizOp. Many are home based. However, be careful when choosing a BizOp. Make sure that the opportunity is tried and proven.

There are exceptions of course. Many larger companies offer BizOps. One example is Sign Biz, Inc. They have been around since 1989 and have over 170 existing locations.

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Article Tags: absolute number, business dealings, business market, business savvy, capital experience, credit score, franchise broker, franchise brokers, franchise opportunities, franchisor, franchisors, industry reference, money, own business, pitch, property lease, question answers, web portals



Related Forum Posts
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]
Are FAQs effective or useless? - Are FAQs effective tools for your company or useless because no one actually takes the time to read them?
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.


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