As you explore Franchise ownership you will have a lot of questions. Below are 9 that we recommend you ask each company you are talking with during your due diligence. Here are 9 Questions to ask every Franchise company:
1: How did the franchise get started and what is the background of your executives?
Who were the founders? What was their motivation for starting the business? Do you possess similar skill sets and a passion for the industry? Finding the perfect match requires not only that you feel the franchisor has adequate experience, but that you identify with the fundamentals of the business.
2: What are your criteria for choosing a franchisee?
Franchisors typically have a list of qualifications and personality traits that fit best with their brand. It’s important to investigate those criteria and determine whether you feel your personality and skill set fit within the system.
3: What is your success rate and how do you define success?
The number of units a franchisor has determines their size but not necessarily their success. Are the franchisees receiving ample support? A large franchisor may be spread too thin while an up and coming franchisor may not have enough resources. Ask what the success rate is among their franchisees and what the reasons are for failed units.
4: What will my territory be and how will it be protected?
Learn how the franchisor manages territories for its franchisees and what rights you have under the agreement. Does the franchisor reserve the right to approve the location of your franchise? Will you have an exclusive or protected territory? Knowing whether you will be protected from competing units can have an impact on your success.
5: What sets you apart from your competitors?
While the market for some brands is highly competitive and saturated, others are more innovative and unique. Where does the brand fall along the spectrum? What is the level of competition in the market and who are the top competitors? Ask the franchisor about their unique selling points and their advantages over the competition.
6: Are there any special licenses, permits or extra insurances I need to carry?
Many industries require special licenses, permits, classes & extra insurances in order for the Franchise owner to open up in that state or area.
Make sure you understand exactly what is required to operate a particular type of business.
7: What is a typical day like for a franchisee?
Learning about the day-to-day tasks and goals for a typical franchisee can help you get a clear picture of your daily work life. In addition, it’s important to ask about the greatest challenges most franchisees face to help you decide whether the franchise opportunity will be a good fit for you.
What are you going to do every day and how many of the existing franchise owners are actually performing those activities on a daily basis?
8: Describe the background of your top 3-4 Franchise owners.
What did those owners do before becoming a Franchise owner? How did their experience impact their success? Is there a certain type of Franchise owner that does well with your Franchise?
9: Can I speak with current & past franchisees about their experience?
This is a critical part of the due diligence investigation. Franchisors are required to disclose the contact information for both current and past franchisees. Speaking with both can give you an honest perspective on how the franchise system operates and its pros and cons. Be very cautious of any franchisor who tries to discourage you from reaching out to other operators or tries to give you a small list of people to call.
Performing the proper due diligence can help you choose the right Franchise that fits your experience, background & capabilities. I hope you were able to get a few nuggets from this article 9 Questions to ask every Franchise company.
About the author:
John Henning has almost 20 years experience in the Franchise industry as a Franchise Developer, Franchise Owner & Franchise Sales Manager. He has personally helped over 500 entrepreneurs open a Franchise business. You can reach John at: john@openafranchise.com
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