Questions to Ask a Franchisor before Buying a Franchise Location
You’re tired of working for someone else and want to experience the thrill of owning your own business. A franchise provides entrepreneurs the opportunity to be their own boss while still experiencing the support of a corporate office to help with marketing, technology and logistics. With the support of a franchise system, you can be on your way to a successful career as a business owner.
Now that you’ve decided to take the plunge, it’s time to started investigating franchise offerings across a variety of industries. Choosing the best franchise offering for your future is a delicate balance between your interests and strengths and the specifics of the franchise system you are considering. It’s important to concentrate on franchise offerings that intersect with your own personal interests. For example, if you don’t love dogs, a doggie day care franchise should not be on your list of potential investment opportunities.
“The relationship between a franchise owner and the corporate team is a significant indicator of future success. We are looking for senior care franchise owners who have similar goals to those of our franchise,” explains to Larry Meigs, President and CEO of Visiting Angels. “We want individuals who are passionate about providing quality at home care services. When our franchisees provide the compassionate care and great service, we find that success naturally follows.” Visiting Angels is a senior home care franchise with more than 400 locations nationwide.
As you narrow your search, you’ll begin to correspond and meet with the franchisor leadership team and a variety of franchise owners. It’s important to have a list of questions at the ready to help you get a feel for the potential viability and compatibility of the various franchise systems you are considering. Consider adding some or all of these questions to your list.
About the Franchise System
How many franchise locations do you have in your system?
Understanding the type of franchise you may be joining is important. Is it an established organization or is it new and growing? Does this matter to you? A new franchise system may allow you to get in on the ground floor, but there could be bumps in the road as the system gets established. A more mature franchise system can offer benefits in terms of marketing, brand recognition and support.
How many of your franchise owners own multiple locations?
Success is a wonderful thing. When a franchise owner feels confident in the system and is making enough money to expand within the system, this is an indicator of a successful partnership.
Who will be my primary contact?
Each franchise has a different system for supporting their franchise owners. Knowing who your contact will be and having the opportunity to meet them can give you a good feel for how you will fit within the greater organization.
What is the Franchise fee? What are the ongoing marketing and royalty fees? Are there other fees associated with owning a franchise?
Opening a franchise isn’t cheap. Know what the fees will be so you can accurately prepare and budget for success.
How much does the typical franchisee make in their first year? On average, during the life of the franchise?
Every franchise owner runs there business differently so naturally profits vary by location. Try to get a ballpark figure for what the average is across the franchise. It’s important to have realistic expectations for what defines success.
What is/are the corporate culture/values?
The franchise you join will play a significant role in your life and the life of your family. Be sure you can interact with and have a positive relationship with the franchisor team. If you aren’t comfortable with them, this is not the right franchise for you.
What are the reasons you would turn down a prospective franchisee?
You want the franchise you chose to be serious about your success and the growth of their franchise system. A franchise system that isn’t discerning when it comes to selling locations may just be in it for the money.
What sorts of technological, equipment, marketing, and development plans are in the works for the growth of the franchise system?
Is the franchisor positioning the company for future growth? Are they looking for ways to improve the business and their offerings?
What characteristics make for a successful franchise owner within your system?
Will you be the right fit for this franchise?
Is there an exit strategy?
It may seem strange to be thinking about closing your location before you even open it, but knowing where you want to end up before you start is important. If you own your franchise until you are ready to retire, how will you divest? Can you sell it? Will the franchise buy it back? Can you pass it to a family member? What if you decide being a franchise owner isn’t right for you? How will you extricate yourself from the business?
About the Process of Opening a Franchise
Are there territories available in my desired location?
Do you want a location close to your home? What if the nearest available location is 50 miles away? How will this affect your decision?
Will you help me find the best location/site for my franchise? Do you offer lease negotiation support?
Location matters. Having the assistance of real estate experts as you scout for locations and negotiate a lease can be extremely helpful.
Do you provide any assistance with financing?
Some franchise systems offer help when obtaining financing. Do they have recommended lenders? Ask questions about where current franchise owners have found help with financing.
Are there any deals or incentives being offered?
Franchisors often offer incentives to veterans, minorities and women. Are there any incentives that help to reduce the franchise or royalty fees?
Typically how long will it take to open my doors after signing the franchise agreement?
Understanding the length of time from agreement to open doors is important. If you won’t be working while you are in the process of opening your location, do you have enough in the bank to live on?
How are disputes between franchisees or between a franchise owner and the corporate office resolved?
Unfortunately, disputes are a fact of life. What happens if you open a location in a town with multiple franchise locations? How will you share leads if your advertising overlaps? What if there is a dispute with the franchisor? Will it immediately result in legal action or are there avenues designed to resolve issues?
What’s in the Franchise Disclosure Document?
The Franchise Disclosure Document provides valuable information about the franchisor. Get a copy and read it.
Is there a Franchise Advisory Board/Committee?
Having a committee of franchise owners to represent your interests to the franchisor is a good thing. Getting involved in that committee can be beneficial to your success.
Do you provide marketing support for grand openings?
It’s one of the most important days your business will have. What support does the franchisor offer to help you get a running start?
Do you have a training program for new franchise owners?
A solid franchise system will offer several days of training where new owners can receive training on systems, marketing and essential information needed to run a successful location.
Questions for After Grand Opening
What sort of ongoing training do you offer?
Does the franchisor offer regular meetings with other franchise owners? Training classes? Visits with a support team? Or will you be left to figure it out on your own?
Is there a franchisee annual conference? If so, what type of agenda is typical for these conferences?
An annual franchise conference is a great way for the franchisor to build positive energy while franchisees learn from each other. What type of training and help can you expect to receive at an annual conference?