Questions to Ask when Choosing a Franchise

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April 28, 2014

Questions to Ask when Choosing a Franchise

Do you love the concept of owning your own business but lack a killer idea and the knowledge of how to run one? If you said yes, franchising is probably for you. But before you leap into a business make sure you know how to choose the right one. Use the following checklist to navigate the franchise purchase.

 Franchisor Questions

  • How long has the franchisor been in business?
  • How long has it been offering franchises?
  • Is it a subsidiary of another company? Who is the parent company? Has that company ever franchised other products or services?
  • What is the franchisor’s current financial condition?
  • Have you received the franchisor’s recent audited financial statements?
  • Who are the franchisor’s directors and officers?
  • Does the franchisor have a reputation of honesty in dealing with its franchisees? With its customers?
  • What is the franchisor’s standing with the local Chamber of Commerce?
  • Have you discussed its plans for the future development and expansion or diversification?
  • What effect will development and expansion have on your dealings with the franchisor?
  • What innovations has the franchisor introduced since first starting?
  • How selective is the franchisor when choosing its franchisees?
  • Have your qualifications been reviewed?

Product or Service(s)

  • What makes the product or service(s) unique?
  • How much of this product or service is presently sold?
  • Have sales been increasing or decreasing?
  • Would you buy the product or service on its own merits?
  • How long has it been on the market?
  • Is the product or service marketable in your territory?
  • Is the price competitive with similar products or services in the market?
  • Have you reviewed the federal/local standards and regulations governing the product or service?
  • Are there product warranties? Are they your responsibility or the franchisor’s?
  • Is the product patented or protected by trademarks or copyrights?
  • Have you assessed competitors of like products in your area?

Sales Territory and Location

  • To what extent is your trading area exclusive?
  • Will the franchisor be opening other franchised outlets nearby?
  • Under what conditions can your sales territory be expanded or contracted?
  • How will you establish the sales potential of your territory?
  • Has the franchisor provided demographic data projected the next five years?
  • Do you have data on the age, income and occupations for people in your area?

Questions for Current Franchisees

  • What was the total investment required by the franchisor?
  • Are there any hidden or unexpected costs?
  • Are you satisfied with the quality of goods supplied by the franchisor?
  • Are you satisfied with the price/quality relationship?
  • How reliable is delivery from the franchisor?
  • How long was it before your operating expenses were recovered by revenue?
  • How long was it before the franchise was able to pay you a reasonable management salary?
  • Has your franchise been as profitable as you expected?
  • What kind of management/training was provided? Did it meet your expectations? Where was it held?
  • Have you had a serious disagreement with the franchisor?
  • Was it settled amicably?
  • Does the franchisor respond helpfully to questions?
  • Are you satisfied with the marketing potential and advertising assistance?
  • If you could change your contract, what would you change?
  • Would you advise anyone to start a franchise with the franchisor?
  • What have you done to make your franchise successful?

The Franchise Contract

  • Does the contract protect yourself as well as the franchisor?
  • Are the rights and obligations of both parties clearly stated?
  • Is the contract specific as to the type and size of operation you are expected to manage?
  • Are the nature, duration, cost and extent of your training outlined in the contract?
  • Are your payments to the franchisor clearly specified?
  • Are the following shown: the franchisee fee, fixed yearly payments, royalty, advertising contribution, continuing services fees.
  • Must you purchase your essential supplies from the franchisor or designated supplier?
  • Is there a minimum amount of merchandise you must purchase from the franchisor each year?
  • What happens if supplies are interrupted? Can you purchase goods from alternate suppliers?
  • Do you have the right to the franchisor’s latest innovations?
  • Is there any annual sales quota? Is it attainable?
  • What types of reports are you expected to provide?
  • Does the contract cover all the franchisor’s verbal promises made during the interview?
  • Will the franchisor maintain any federal and provincial registrations?
  • Can the contract be renewed? If so, on what terms?
  • If leasing the location, will the lease be for the same term as the franchise agreement?
  • Can the lease be renewed if you renew the franchise?

Excited to start looking into your own franchise after reading this?? Me too!
Make sure you sign up for our webinar with TWO MEN AND A TRUCK® on Wednesday, April 26 at 6:00pm to talk franchising with President, Randy Shacka and two franchisees who happen to be veterans like you!

Save Me a Spot!

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Bring these questions, they’re ready to answer all of them!

 

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2017-04-07T13:40:13+00:00

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