Five Questions to Ask Before You Buy
by Franchise Business Review
If you’re considering a franchise opportunity, asking a franchisor the right questions in the right way is critical to learning more about the brand and whether it will be a good fit for you. The trick is to ask open-ended questions that will really make franchisors think before they answer. Don’t ask “Is your marketing program successful?”; ask “How do you ensure that your marketing program is successful?”
Keep in mind that becoming a franchisee is the start of a long-term commitment and relationship. Franchisors expect that you will have a long list of questions you need answered. (On the flip side, you should expect to answer lots of hard questions yourself.)
To get you started, here are a five questions you should ask any franchisor before you buy:
1.) What characteristics make your top-performing franchisees successful and what is it specifically about my background that you think makes me a good fit for your system? This will let you know immediately if they have done their homework on you and think you are a good fit for their system or if they are just looking to sell you a franchise. The most successful systems are selective of who they accept as franchisees. Listen carefully to the franchisors response. Make sure they are addressing items specific to you and your background and not just generalizing common traits.
2.) Even in the best business partnerships, disagreements and conflicts happen. If I am a franchisee and I have a problem, what processes do you have in place to come to a fair solution that works for both of us? Can you give me a couple of recent examples of issues with franchisees and how they were resolved? It’s common for a franchisor to only want to share its franchisee success stories, but every brand has the occasional conflict. It’s important to know how they deal with franchisee-franchisor disagreements and if the resolution meets your expectations. And if they tell you everything is perfect all the time, don’t believe it; it’s not.
3.) I know that for at least the first few years I will be very dependent on you and your staff to help me succeed as a franchisee, and I think your fees are very reasonable given the support I will need. But in the future, when I am more self-supporting, where will I see the value from the fees that I am paying you? One of the obvious values a franchisee receives from an established franchise system is the brand and system itself. But brand alone will not justify the ongoing royalties you will be paying over the long-term. Look for specific examples of programs and services that the franchisor is continually introducing to the system to provide added value for both new and old franchisees.
4.) What trends do you see in this industry that could have a negative impact on the business over the next decade, and what are you doing strategically to overcome these challenges? Every business and industry has significant challenges to overcome in order to remain competitive. Look for honest and forthright feedback to real challenges. Ask franchisors how they’ve supported their franchisees during the recession and what strategic planning they’ve done to protect both their business and their franchisees in the future.
5.) Do you have a franchisee satisfaction report that is publicly available? For obvious reasons, we’re a big proponent of franchisee satisfaction reports, but we bet any franchisee who has used them to research an opportunity will tell you survey results were an important piece of their research. Survey results will highlight strengths and weaknesses in a system so you can focus your due diligence on the right areas. They will help you get better information from your own validation efforts.
On FranchiseBusinessReview.com, we list dozens of companies with surveys available. These are the ones who want to shout publicly that they have happy franchisees, but the truth is, we have surveyed hundreds of systems. Many franchisors will have their survey results to share with you if you ask for it, and if a franchisor hasn’t surveyed, be sure to ask why.