10 Franchise Questions to Ask Franchisors
For those that are considering buying a franchise: 10 Questions, you need to ask. Very important items that you need to consider.
Written by
Patrick Findaro
Published on
23 Mar 2022
Table of Contents:
This article is based on a video originally recorded on Visa Franchise Youtube Channel.
Contents
Listen to this article
1. What Should I Know about Joining Your Franchise System?
It kind of keeps it open, and they can tell you all about all the different reasons why you should invest in the business, why they’re motivated to continue growing the business. It keeps it pretty wide open.
2. What Competition Is there in this Field?
Are there other franchises in the space, mom-and-pops, big corporately owned and managed businesses that you’re competing with?
3. Can You Give Me a Breakdown of All of the Expenses Associated with Getting Started?
Ask for a breakdown of all the expenses that you can expect to open up the business, get it to the point of break-even, as well as ongoing monthly expenses for running a franchise.
4. Explain the Contractual Responsibilities if I Join Your Franchise System? (i.e. Length of the Agreement, Renewals, etc.)
How long is it for? Do you have to pay another franchise fee, half a franchise fee, or nothing if you wanna renew after, say, 5 or 10 years? Are you able to buy products and services from any vendor, or do they have to be pre-approved? And also ask how the franchisor makes money beyond the royalty, if they’re making money in other ways, beyond the initial franchise fee, and then the royalties they collect.
5. What Does Your Training Program Look Like? What Ongoing Training Do You Offer?
Ask what their training program looks like. Are there an initial two weeks on-site? Also, how is the ongoing training?
6. What Goods or Services Do I Have to Purchase Directly from You, the Franchisor, and Can I Competitively Shop for a Better Deal?
Ask how they award territory. Are there exclusivities? Is there a possibility to expand, where you just might wanna commit yourself to open up one location?
7. What Is My Protected Territory and How Is It Defined?
Are there shared learnings between the franchisees? Does the franchisor help with facilitating conversations with franchisees to share best practices?
8. How Many Franchised Units Have Failed and Why?
Now we’re getting a little more directly to the point. How many franchise units have failed since the system opened, and can you give the reasons for why they failed? Number eight, getting a little more direct. Ask how many locations have failed and asked for reasons why those locations failed.
9. How Have Previous Franchisee/Franchisor Disputes Been Settled?
Ask if there have been any previous disputes with the franchisor and franchisees that have ended in a lawsuit or a major disagreementdisagreement and ask how they were settled.
10. What Happens when I Want to Retire or Sell My Business?
What happens when I wanna retire from the business or move on to some other activity? Is there some precedent in terms of how much these businesses are sold for? Is there a possibility for the franchisor to buy it back, for the franchisee to buy it back? When you ask this question, it’s really important to stipulate that you’re very enthusiastic about the brand, but you wanna always think about what might happen in 5, 10, or even 15 years, and you wanna basically understand what the exit strategy is and potential options.
Is there some precedent in terms of how much these businesses are sold for? Is there a possibility for the franchisor to buy it back, franchisee to buy it back?
When you ask this question, it’s really important to stipulate that you’re very enthusiastic about the brand, but you want to always think about what might happen in 5, 10, 15 years, and you want to basically understand what the exit strategy is and potential options.
Those wrap up the franchise questions that you should ask franchisors. We also did another video on the top 10 questions to ask franchisees. These are not all the questions that you should be asking franchisors or franchisees, but these are 10 important franchise questions to ask.
If you’d like to see our guide, download it at the top of the page and find out about franchises on our Visa Franchise site.
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