Questions To Ask Before Buying A Franchise

Buying into a franchise requires a huge commitment of both time and money. A major part of your success depends on the reputation and business model of the franchise. There are many who buy a franchise just because they love the product or are taken in by the marketing.

Franchise Questions in a thought cloud over a thinking person's head to illustrate needing help and answers on how to start up a new licensed chain restaurant or store

You should do more research than just that! And it is very important that you should talk to the right franchise consultants about the opportunity.

So, here are some of the questions you should ask before buying a franchise.

How will you help with my buying process?

You should ask the franchise consultants about the help they would give you – in the form of reference material and so on. Ask them about their experience in the industry and why you should pay them for their advice. Ask them why you can’t just go to a franchise show yourself or browse franchise directories and come to a decision on your own. Basically, you’ll want to know what they bring to the table.

What are the questions that I should ask the franchisor?

The most important thing you’ll want to know from a franchise consultant is if they can give you a list of questions to ask the franchisor? They shouldn’t have a problem with that. Now, the document given by them should have a plenty of powerful questions and not just consist of just a few key points.

Have you been a franchisor or working for a franchisor?

You will want to know if the franchise consultant is working for a franchisor or is a franchisor herself. If that’s the case, you should walk away from the meeting immediately, as you don’t want to get advice from franchisors as their objective is to sell the business to you and not to understand your position in any way.

Have you been a franchisee yourself?

It really helps if the franchise consultant has been a franchisee in the past, or works as a franchisee even presently. This means they will have a much better understanding of your concerns and worries and will be able to address them better. They will know exactly what’s bothering you, as they have been through the same process themselves in the past.

What’s the fee structure?

You want to know from the franchise consultants about how much they charge for their service. If they say it’s a free service or charge only a nominal sum, it means they are basically working for a franchisor and their only objective is to get you to sign and part with your money. You certainly wouldn’t want to take advice from consultants whose sole agenda is to get you to buy the franchise, regardless of whether it is right for you or not.

What are the other franchisees saying about the franchisor?

It would help you to know what the other franchisees are saying about the franchise and how the franchisor has been running the business. You can look for information on the internet and check sites such as UnhappyFranchisee.com for more information on this. Find out if there’s too much negativity about a particular franchise.

What’s the failure rate?

So what’s the failure rate of franchisees? How many franchisees had to be shut down by the franchisor? If the number of closures is too much, that should give you a reason to be worried about joining the franchise.

What’s the commission paid to the franchise consultant?

Are the franchise consultant paid any commission by the franchises they recommend to you? If so, how much? You don’t want franchises to be excluded from your search just because the franchise consultant wasn’t offered a decent commission by them.

Are there any personality or suitability tests done to assess your suitability to franchising?

Many franchise consultants use the psychometric and behavioral tests that are available in the market – which cost anywhere from $50 to $200 – to assess your suitability for a franchise. It’s important to make sure that you are the right person to join a franchise and meet all the requirements for such a business before signing up. You certainly wouldn’t want to take the wrong decision and regret later.

Check out the franchises that failed. Find out why?

For every successful franchise owner, there are a dozen that have failed. It is important to do your research and to talk to a few former franchisees and find out why they failed. Was it because of a lack of operational support from the franchisor, or was it that the franchisees were not serious enough about the opportunity? What about the location – was that a mistake?

Is there anyone who regrets buying the franchise?

Talk to the existing franchisees and find out how they feel about the opportunity. Would they do it all over again, sign up with the franchise, knowing what they now know about the business? Has the business made them wealthy or financially independent? Or is it something that they hate to do, and barely manage to scrape a living somehow.

Which are the franchises that you would avoid completely?

It is important to know from the franchise consultant about the franchises they really hate and would definitely advise you to stay away from. They should have good, solid reasons for having come to such a conclusion.

How are conflicts resolved in this business? 

So what happens in a franchise system if a franchisee has a disagreement with company policy or a certain procedure? Will there be some sort of mediation with both sides arriving at a compromise? Or is the franchisor completely intolerant of any display of individualism or originality? You want to join a franchise where entrepreneurship, creativity, innovation and originality is celebrated, not punished.

How much of the chain is franchised? 

In many franchise systems, most of the units are owned by franchisees and a small number are owned by the parent company itself. The last thing you need is competition from a store run by the parent company. These stores don’t pay any royalty and so are at an advantage compared to you. So find out how much of the chain is franchised and if there are any company stores close to where you are.

Can I renegotiate the franchise agreements later?

A good franchise allows you to. True, most of the established franchisors do not accept any renegotiations or variation in terms and conditions. But new and ambitious franchises that are eager to grow will be keen to reward their top performers with new and improved contracts. The franchise consultant should know about the franchisors that are willing to renegotiate a contract later.

Do they offer any support apart from initial training? 

Sure, most franchisors offer extensive training to prepare prospective franchisees for what is to follow, but do they offer operational support as well, after you launch the business? The last thing you need is for the franchisor to forget everything about you a couple of months after you get started with the business.

How experienced is the franchisor? 

There are many companies out there that start selling franchises within a year or two of starting their business, even before their business model finds any real success in the marketplace. Essentially, these businesses are looking to make money by selling franchises and have little interest in growing the company, creating a loyal base of satisfied customers or investing in research and development. You should be wary of such franchisors.

What is it really like to own the franchise? 

It would really help if you observe a franchise owner at work and find out how running the business is really like. It’s not true that once you buy a reputed and well established franchise, the business runs on an auto-pilot. A lot could go wrong. For example, are you prepared to work 12-15 hours a day for at least the first couple of years? Where will you get your staff from? Are you prepared to make cold calls to make a sale or two? Running a franchise is just like running an independent business, except that you’ll receive the backing of an established name in the industry. But whether you succeed or not, depends on your own efforts.

Buying a franchise can be just the right opportunity that you’ve been looking for. But it is important to ask the right questions and know what you’re in for, before you sign the dotted line.

Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

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NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

Privacy Policy Terms of Use

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