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Questions to Ask a Franchisor

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Buying a franchise is an exciting and promising venture that comes with several advantages. Having access to a proven business model and benefiting from a built-in customer base are features that make franchising an extremely attractive offer. However, franchises are costly investments in terms of time, money, and effort, and making an uninformed decision can be fatal for your finances. 

As a potential franchisee, it is in your best interest to be aware of the risks the franchise agreement entails and to ensure you are getting into a business that is likely to be profitable.   

The way to secure your investment is by doing in-depth research on the franchise business and its proprietor. This phase, known as the franchise discovery process, is the moment in which you do your due diligence to have a deeper understanding of the franchise’s business model. This process involves having meetings and conversations with the franchise’s stakeholders. In this phase, you\’ll ask questions to the franchisor, do your online research, and ask other franchisees about their experience as part of the company so you can conclude whether you want to move forward with the deal. 

In this article, we\’ll reveal 50 important questions to ask a before you invest in a franchise that will help you clear your expectations and evaluate if it is a good fit for you. Comprised of 8 sections, these questions will help you determine the franchisor’s business experience, your rights and responsibilities, and the financial implications of entering the franchise. 

About the Business

These questions are directed toward the history of the franchise business and the franchisor’s experience. You will have an overall understanding of the company, whether its model has shown positive results, the franchisor’s experience, what you are expected of as a franchisee, and the relationship the franchisor has with their franchisees.

This way, you can understand the background of the company and its founders and if you identify with its core values.  

What should I know about joining your franchise system?
How long has the business been franchised?
How did the business start and how long was it established before it became a franchise?
What is your experience in this industry?
How many other franchise locations are there?
What percentage of franchisees renew their franchise agreement?
What are the most common challenges franchisees face, and how do you help them overcome these challenges?
How financially strong is the franchise company?
What is the average income potential?
What is the success rate of franchisees?
How many franchise units have failed and why?
How do you vet franchises? What are your criteria for choosing them?
What are your expectations of your franchise owners?
May I speak to one of your franchises?
Who owns the intellectual property?
Have you been sued and why?
How have previous franchisee-franchisor disputes been settled?
Have you been involved in bankruptcy?

Financial

It’s key that you know the amount of investment you are going to require to start the franchise and the operating capital you need until the business breaks even. Rather than just looking at the franchise fee, these questions will help you evaluate the total expenses you need to invest to start running the business. 

Get a better insight into how much profit you will generate and how long will it take to start receiving profit. Also, you are going to be aware of your ongoing financial obligations, such as royalties and advertising fees.  

What is the total investment required to own a franchise?
How much is the franchise fee, and what does this include?
How much working capital will I need?
Can you give me a breakdown of all of the expenses required to start running the business?
Do you offer franchise financing?