Before You Buy: Important Questions to Ask Your Franchisor

date icon 10 minutes to read date icon 3rd November, 2022

Joining the world of franchising is an exciting journey to embark upon. It offers a plethora of advantages to franchisees that can truly help propel them forward on the road to business ownership. However, much like any business venture, due diligence is a must. This involves doing fundamental research into the franchisor, current franchisees and the industry as a whole.

Being prepared comes with asking the franchisor the right questions so that you can make a more informed decision. This is why we’ve put together a list of questions that you need to ask yourself, the franchisor and existing franchisees so that you can be as certain as possible about the opportunity you’re about to get involved in. Let’s take a closer look.

Questions to ask yourself

The process involved when you want to buy a franchise should begin with a self-evaluation or self-inquiry. This will help you determine whether franchising is, after all, the right choice for you. As a result, here are some questions to ask when buying a business in the UK:

1. How do you feel about following an established system?

Being clear with yourself about your own inclinations regarding following an established system is a must. This is because franchising, by its very nature, is system and process-oriented and requires all franchisees to follow these to ensure uniformity of the brand.

2. Are you willing and able to take on the role of a business owner?

The second question you should ask yourself is whether you are willing and able to take on the role of a business owner. Business ownership requires certain levels of skills and a dedication to the main cause over the long term (anywhere from three to 20 years). So, think carefully about what you’re getting involved in and whether you can truly commit to what is being asked of you.

3. Do you understand the financial and legal implications of purchasing a franchise?

You should also be aware that franchising is an investment. You will need to be clear with yourself regarding how much you can afford to invest. This will possibly mean speaking to a lender to decide what your financial capacity is.

Furthermore, you need to educate yourself about the legal implications of purchasing a franchise. This will mean knowing where you stand in addition to being aware of your rights and responsibilities.

4. Do you want to be a part-time or full-time franchisee?

Another important question to ask yourself is whether you wish to be involved in franchising on a part-time basis, while possibly supplementing your franchise efforts with another source of employment. Alternatively, you may wish to make a decision to take active involvement your business full-time.

It’s important to be aware the part-time franchises are fewer in terms of options and this is something to consider as well.

5. Are you passionate about the industry in which you are interested in purchasing a franchise?

The beauty of franchising lies in the fact that it spans many different industries. From gym and fitness to arts and crafts or even professional services such as legal and accounting – you will be spoilt for choice.

However, your final decision needs to be related to your passions. You’ll be committing long-term to your future business and if you’re unhappy with it from the start, it’s likely that you’ll continue to be dissatisfied in the long term. Therefore, being passionate about the industry you’ve selected is crucial.

6. What are your strengths and weaknesses?

Knowing your strengths and weaknesses is a further question to explore when it comes to joining the world of franchising. Perhaps you have prior leadership experience or you’re good with sales. This can come in very handy when it comes to franchising. However, you may struggle with time management or prioritising tasks. It’s therefore essential to ensure that you are aware of where you can offer support and where you will need to be supported.

Questions to ask your prospective franchisor

In addition to your self-inquiry, you should also be prepared to speak to your franchisor. Here are some of the most important questions to ask before buying a franchise:

1. What are the origins and background of your franchise business?

The answer to this question will help you see how long the franchise business has been operational for, what their track record of success is as well as their establishment in the industry as a whole. It’s also important to ask what the franchisor’s competitive advantage is.

2. What is the professional background of your top-level executives?

Make sure to research the professional backgrounds of the franchisor’s top-level executives. If they have many years of experience behind them in the franchising industry, this probably means that you’re in good hands.

However, you should also see whether any of the senior management or key personnel are leaving the system. This may signify of internal dissatisfaction with the way in which the franchisor runs its business.

3. What type of research and marketing has been conducted to test the validity of the franchise concept?

This question is quite detailed and requires asking several sub-questions in order to get a clearer picture of the franchise business. These may include:

  • what type of consumer research has the company conducted and what were the results?
  • has the franchisor conducted any market studies on the territory to ensure that it can support a franchise?
  • what are the demographics required to support a franchise?
  • and what are the traffic counts required to support a franchise?

4. What criteria do you use to pre-screen and select a franchisee?

Some franchisors indicate that their prospective franchisees do not require any prior experience in their sector to become successful business owners. Meanwhile, others will look for specialist skills, experience, knowledge and even certain attitudes to see if the franchisee will be a good fit.

As a result, the franchisor’s selection criteria can help you determine whether you will be a good fit for them as well.

5. What is the total investment amount?

One of the most important questions to ask when buying a franchise includes what investments are required to own a franchise. The total investment will differ from franchisor to franchisor, but some common elements to consider include: the total franchise fee; furniture, fixtures and equipment; leasehold improvements; lease deposits; other deposits; franchise training; travel expenses; supplies; advertising and brochures; advertising your grand opening; inventory; pre-opening staff costs; working capital until you break even and for living expenses; whether the franchisor offers funding support or whether you will need to approach a lender as a common funding source for a franchisee; etc.

6. What are the ongoing fees that will need to be paid?

Some of the most common fees a franchisor will require its franchisees to pay include royalties and advertising. You should have a clear figure in mind when it comes to what you’ll be expected to pay on an ongoing or continuous basis.

7. What is the financial position of the franchise?

You may not be an accountant but sitting with one and examining the financial position of the franchise can help you determine whether it is in a strong position or whether it is barely making it. It’s also crucial to ask what the potential for profitability is.

8. Are you willing to negotiate the terms of the franchise?

It’s important to discuss whether the terms of the Franchise Agreement are negotiable and to what extent. Furthermore, under this question are sub-questions which include:

  • the duration of the franchise term,
  • whether you’ll have a protected territory,
  • how conflicts are resolved,
  • what to do in the event of non-performance,
  • as well as exit clauses that consider ways in which you can sell your business.

9. What territories and locations do you operate in and what is their success rate?

This is another important question that explores the physical geographic location where you’ll be operating in. In addition, you should ask what the success rates are of neighbouring franchisees as well as those further afield.

10. What kind of support is offered beyond the initial training?

Most franchisors offer initial training and support to their franchisees. However, this is where the similarities seem to end. This is why you should speak to your particular franchisor and ask them about the location, duration and additional costs of initial training; who the training should be attended by; the costs of additional staff attending training; the contents of the training curriculum; who conducts the training and what is their professional background; the parties responsible for transportation, room and living expenses; whether you’ll get help with the pre-opening, grand opening and the initial period and at what duration, type and cost.

11. How will marketing and advertising be carried out?

Marketing and advertising play a big role in promoting a franchise business. As a result, you should ask what type of consumer advertising the franchisor recommends.
Some additional questions that might give you a better idea of marketing activities:

  • what types of cooperative advertising programmes are being used?
  • what percentage of sales is recommended for advertising/marketing?
  • how are leads and customers acquired?
  • what are the franchisor’s regional/national advertising budget and programme?
  • how is the franchise marketing plan created?
  • and what key performance indicators do they use?

Questions to ask current franchisees

Further questions to ask when franchising should be aimed at current franchisees. These are the people who make the franchise operations work and their efforts and know-how can help you make an informed decision.

1. Did the opening of your business go according to plan?

This can help you discover any hiccups that could have been experienced and then seek ways in which you can avoid these.

2. How effective and useful was your initial training? What about ongoing training?

Knowing about the initial and ongoing training can help you see the value in them.

3. How much support does the franchisor give you on a day-to-day basis?

Being aware of the franchisor’s actual levels of support will give you insight into what you can expect in terms of support for yourself.

4. What are your levels of profitability?

This is a big one because you’re in business to make money. As a result, knowing what other franchisees are turning over can help you determine whether you, by exerting similar efforts, can achieve the same or exceed expectations. It’s also important to tally up what the franchisor has expected profitability to be like compared to actual levels of profitability.

5. What do you wish you had known going into business that you did not?

This question seeks to determine whether the franchisee would have done anything differently when they got started. It’s also a great way of finding out whether they would buy the franchise again if they had the opportunity to do so and whether they are happy they became a franchisee.

6. What are typical day-to-day operations like?

In addition to getting an overview of the daily operations, which may include challenges and successes, you can also ask the franchisee whether they can let you shadow them for a day.

7. Are there any hidden fees?

A great way of avoiding unwanted financial surprises is by asking whether there were any hidden fees that could be easy to overlook.

8. What’s the relationship with your franchisor like?

Unless a franchisee has exclusively been prevented from sharing details with you as set out in their Franchise Agreement or in a Non-Disclosure Agreement, they should also be able to let you know what levels of support and what type of communication they enjoy with the franchisor.

In conclusion

Although this list may seem a bit overwhelming, it’s a great starting point for doing your due diligence and thoroughly preparing yourself for the world of franchising. What’s more, if you’re wondering how to franchise a business and you need more help, we’re just an email away and ready to be of assistance.

And if you still haven’t found a franchising opportunity, then looking at a franchise directory could be a great starting point.

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