Must-Ask Questions Before Becoming a Franchise Owner

Asking the right questions makes a world of difference when researching a franchise. We work
with our candidates and help prepare them to ask the right questions so that they can determine which
franchise is best for them.

Before Buying A Franchise

Here are 10 key questions we strongly recommend people ask before getting involved in a
particular franchise operation:

1. What are my upfront costs and what's included in the fee? This is the most obvious
initial financial question.

2. What other fees should I plan on paying? You may be required to lease property or
equipment from the franchisor. You may have to pay the franchisor a percentage of
your annual sales. Those numbers must be cranked into your own equations when
you are trying to figure out if a franchise deal makes sense.

3. How is the franchisor making money? Franchisors may make money by owning
their own establishments, by providing services to franchisors, by simply collecting
royalty payment or by some other combination. It's tough to make a blanket statement
about whether one model is better than another, but surely you want to know where the
franchisor's own interests lie.

4. What restrictions do I have on suppliers? Are you going to be required to purchase
certain goods or services from particular vendors and/or from the franchisor? If certain
purchases are required, are they going to cost you more than you would otherwise have
to pay if there were no restriction on where you could buy them?

5. What kind of regional protection am I getting? Do you have any guarantees that the
franchisor isn't going to sell other franchises or open up its own outlets in your
geographic area? If so, how long are those guarantees good for?

6. What kind of empire-building opportunities do I have? The flip side of the previous
question: Do you get first dibs on new franchises in or near the same area as your first
franchise? Some of the most successful franchisees are those who own multiple outlets
in the same area and are able to develop their own economies of scale.

7. What kind of training and support do I receive? A good franchise will include solid
training and ongoing follow up / mentoring practices. Franchises know their success is
based on your success, so they should be proactive in teaching you the business right
from the start.
8. How many franchisees sell out in a year? A franchisee that gets out of the business
by selling to someone else isn't necessarily a failure. Indeed, he or she may be selling a
successful venture. But you still need some idea of the turnover rate of franchisees.

9. What's the value of a re-sold franchise? Another way of looking at the prospects for
franchisees is to look at what happens to those who sell their establishments. What did
they get for the re-sold franchise relative to what they put into it? Was it a profitable
investment, or were they simply looking to get out and cut their losses?

10. What are the terms of me selling my franchise? What if you got sick, or had to
move quickly for family reasons? Can you sell to anyone, or do you have to deal with
the franchisor? Would the company charge you something to sell your franchise or
otherwise restrict your ability to pull out of the business?

Patrick Elsner
Patrick@thefranchiseconsultingcompany.com