Top 5 Questions To Ask A Franchisor

Investment Cost?

You need to understand what’s it going to cost all in for you to get into the concept and opening doors. You start with a forecasted amount from a franchisor that will include some of the real estate costs, furnitures and fixtures, etc. However there are many more costs to consider such as startup capital , inventory , electric bills, lease , so on and so forth. It is very important to not be undercapitalized especially when investing such an enormous amount of money it is important to know exactly where it is going to go.

Whats the ROI?

When investing lot of money into a concept your probably wondering when your going to see a return if you make that investment. Your going to want to know how long until you start seeing a return and what type of return you will see? Unfortunately that information takes research, a franchisor cant answer those questions specifically due to so many factors at play once those doors of your business open. Many people impulse buy franchises. THIS is NOT an impulse Buy. This could be the biggest investment of your lifetime so you want to do thorough research without emotion, figure out how to make your money back in a timely fashion and learn all the in’s and outs’ you possibly can.

What are the Fees?

Franchisors charge fees for you to access use and operate their concept. Some fees include franchise fee, royalty fees, marketing funds, etc. Very important to understand what those fees are . You are paying them for the length of term of the contract you have with that franchisor. You will be paying that fee regardless if your business is making money, so it is pertinent to research all the fees and understand what we are benefitting from by paying them. You cannot research this enough as it would be a burden if these fees effected your profit down the road.

How do I qualify?

You are going to start spending time and money before you become a franchisee. There are many costs as part of your due diligence to become a franchisee, the sooner you know if your qualified , the sooner you know wether you want to continue to keep investing time and money in the process of that concept. Credit, Background , Net worth are a few of the steps to the qualification process.

Have any Units Failed? Why

Every business has a life span. This question gets asked too often and the reality is all units fail, if your looking for failures you will find them .You need to do you due diligence and go visit successful franchisee’s. Find out everything you can about that franchisee and how other units failed around that one. Was it an operational issue? Was it a franchisor issue? There are never too many questions to ask. Franchisors will do anything in their power to ensure your success. Failures are scary and its not necessarily a red flag to get out but instead something that needs to be scrutinized . For the most part the answers do not come from the stories of successful franchisees, learn from someone else's mistakes by analyzing their failures.