Top 10 Questions To Ask A Franchisor

questions to ask a franchisor

Planning to expand your business? Hoping to find a new means of earning an income?

Instead of spending money at the casino or dipping your toe into Forex, why not buy a franchise? This is a great solution because the brand is already out there. You simply have to take what already exists and keep it going.

That said, not all franchises are equal. 80% of businesses drop off the map in less than 2 years and picking the wrong franchise could lead to this defeat too.

There are several questions to ask a franchisor before settling on one. You want to know all the fees, how much you need to invest, and how profitable the franchise is.

Don’t know where to start? Here are 10 crucial questions to ask before signing on with a franchisor.

1. How Did the Franchise Start?

This should be the first question you should ask when interviewing franchisors. Knowing the founders will enable you to ask their motivation for starting their business in the first place. You can also ask their skill sets and assess their passion for their industry.

Your perfect franchisor shouldn’t only have enough experience. For you to succeed as a franchisee, you need to identify with the fundamentals of their business.

2. What Are Your Criteria for Choosing Franchisees?

In a typical situation, franchisors have a set of qualifications that will best fit with their brand identity. That’s why it’s important to explore these criteria before committing. This will ensure that your personality and skills will fit within their system.

Does the franchise meet your personal vision/mission goals? Does it cater to the niche market you want to target? Does this franchise qualify for the distribution plan you aim to utilize?

3. How Much Do I Have to Invest Before Opening My Business?

Your initial investment for starting your franchise can range from a few thousand dollars to over a million. Always remember that the initial franchise fee is different from the other start-up costs. Some of these include:

  • Real estate
  • Equipment
  • Licenses

That’s why you need to have an in-depth discussion of these items with your franchisor. That way, you’ll have a better understanding of what you’re investing in. It also allows you to gauge the necessary budget to get your business off the ground.

4. How Much Liquid Capital Do I Need to Cover the Franchise Until It Breaks Even?

As a franchisee, you’ll need enough money to maintain your operating capital for the first few months. You need these funds until your business starts breaking even. With that, you need to ask your franchisor the average duration needed for most franchisees to start earning money.

5. What Are the Ongoing Fees?

Always take the time to understand whether your franchisor will obligate you to make ongoing payments. Check whether you need to pay some royalty or other fees like advertising. If you ask this question, you’ll have the means of planning your business’s financial health in the long run.

Some of the most important questions to ask a franchisor reveal hidden fees. They might not tell you upfront about some costs but dig a little deeper and you might unveil unexpected expenses.

6. How Strong Are the Franchise Company’s Finances?

You should ask your franchisor’s recent financial statements. This will give a clearer picture of how your franchise system’s financial health. Always ask for your franchisor to explain their plans for growth as well as their current growth situation.

Check whether their income is mainly from the royalties or the franchise sales. While you’re at it, make sure to know whether the franchisor puts enough funds to the system.

7. How Many Other Locations Does the Company Have?

To determine the size of the franchisor, you’ll need to ask the exact number of locations they have. Take note that this doesn’t determine their rate of success. That’s why you need to probe deeper and ask whether the franchisees get enough support.

Take note, a large franchisor might spread its resources too thin while a small one might not have the right amount of resources. Ask about the franchisees’ success rates to know whether you’re likely to succeed. Also, check the reasons why the other ones failed.

8. How Much Money Can I Make?

This question isn’t aimed to know what you, as an individual franchisee, can earn while doing business. After all, they won’t have the means of predicting each franchisee’s success. What they have is a good idea of how much a typical franchisee earns and the income potential of the business.

Be aware that franchisors will often focus on gross sales. They will often omit expenses for operating costs like rent. Make sure to ask and make them obligated to answer.

9. What Sets Your Company Apart?

The market for some brands can have fierce competition due to saturation. The unique and innovative companies will often rise above the others and become industry leaders. That’s why it’s important to ask the franchisor where their brand falls.

Ask about the level of competition in the market as well as their top competitors. Make sure your franchisor lists their unique selling points. You’ll need all the advantages you can get if you want to beat your competitors.

10. What Are Your Support Offers Beyond Initial Training?

You need to find out the franchisor’s ongoing support options and compare it to other companies. Ask whether they can offer daily support and ongoing training. If you’re comfortable with their support level, they might become a viable choice as franchisors.

Use These Questions to Ask a Franchisor Today!

These are the top questions to ask a franchisor before you commit. Getting a franchise is a big investment, meaning you need to be careful about which to pick. This determines your success in the long run.

Do you need help with franchising? Contact us today!