What Should I Ask the Franchisor?

If you want to draw the maximum benefit from your meeting with the franchisor, you must be well prepared. Here we have a sizeable selection of the questions you must answer before you buy a franchise. The list is comprehensive enough and it will not do to bring up all the suggested issues. Some may have already been addressed at the presentation of the franchise or on the website of the franchisor. When you familiarize yourself with the main sources of information on the franchise outlined in the previous chapters, you would do well to prepare 10 or 15 questions you can put forward in person.

In case you are perusing this book as an entrepreneur with a successful venture and you are about to develop a franchise chain, the following questions will help present your business in a convincing manner.

History

How Long Have You Been in the Business For and How Long Has it Been Since You Started Offering Franchises?

If the business has been around for a while, it is probable that the technology and procedures involved have been tested and fine-tuned.  A long history is also indicative of the profitability of the model and the potential success in replicating it through a franchise formula, not merely in its home base but in new markets too.

Do You Offer Franchises Through Other Brands?

Often franchisors offer a portfolio of various brands. This means you can acquire franchises for several brands simultaneously, which you can offer under the same roof. Ask if the other brands in the portfolio are financially stable. If that is not the case they will burden the budget of the franchisor, divert financial or management resources from him/her and in the final account create problems for your brand. Find out if the various brands are not in direct competition. If the franchisor manages two fast food chains and one starts losing customers and money to the other, your business could suffer damage. The franchisor may remain unmoved by this cannibalism or could neglect the less successful project.

How Is Business Going?

Pay special attention to the way the franchise manager addresses this question. Does he/she boast about the number of franchises he/she has sold since the beginning of the year or that sales in working franchises are rising exponentially?  What you should worry about is where the franchisor gets most of his/her income from: initial franchise fees or monthly royalties. Obviously what you want to hear is that the company is financially sound and depends on the monthly royalty fees of thriving franchisees who are happy to divert part of their profit to headquarters. At the very least the franchisees must be making enough money to cover their expenses. If they are not, they will go under as soon as the first crisis rears its ugly head.