If you are asking "What should I be asking a franchisor?" then this guide is for you.
It's our summary of some of the most important questions to be asking. If you are assessing multiple brands, ask the same questions to all of them. It's the best way to compare them and allow you to make the right decision.
Either download the guide or read the text only version just below.
Introduction
Every franchise brand has their own idea of what you need to know to make a decision about whether or not to invest in their brand.
It can become confusing and difficult therefore to compare each brand fairly and you may end up making your decision without a proper comparison.
This guide is designed to provide you with a structured approach and some important questions for you to ask as part of your due diligence process.
Make sure you ask all of them to every brand you speak with and feel free to add your own questions. These are just 10 that we feel are very important for the majority of aspiring franchise owners.
We hope it's useful for you.
Best of luck!
Q1 What is the total investment required?
This should include;
License Fee
Set up costs including required inventory, office equipment, real estate, vehicle acquisition, additional training and anything else that is a fixed cost to set up the business.
Operating costs Staff, travel, marketing, PR, rentals, etc
Financing arrangements available Either through external or internal sources. explore both, if possible.
Are there any minimums for the Managed Services Fees (MSF)/Royalties
Q2 What do the franchisees earn?
If you can get average annual figures for the below for the first 3 years of operating this is the ideal situation. It will help you to understand when you may be likely to see a return on investment.
Turnover
Profit margin
For as many previous years as you can, it would also be useful to get the below to get an idea of any trends appearing in the business.
Highest and lowest turnover for franchisees
Average turnover for all franchisees
Q3 What is the franchisee attrition rate?
In other words, what is the churn rate of franchisees for the brand?
How many joined
How many left due to failure
How many resold their license
How many retired
How many renewed
Q4 What challenges does the brand face?
Identify the peaks and troughs that the business will inevitably face.
How did they cope through COVID?
Are there any season challenges?
What are the competitors doing currently?
What is the biggest internal challenge?
Q5 Who will be my main point of contact?
Whether it is a five or ten year agreement, it's a long time to work closely with someone. When investing in a franchise you will be relying on someone for the franchisor for guidance, advice and support. You need to make sure that you can have a professional working relationship and have confidence in this person or team of people. Speak with and meet with them, if possible.
Q6 Is there any marketing support provided?
Some brands will offer lead generation support, but this is pretty rare. The vast majority will offer marketing materials, training and some support, but ultimately marketing activities on a local basis will be the responsibility of the franchisee.
Ask for examples of PR & Marketing campaigns
Can you see some of the marketing materials?
Do you have access to an internal marketing team?
When was the last brand refresh?
What happens to website leads? How are they shared?
Q7 How does the network communicate?
One of the advantages of being part of a franchise network is that you are surrounded by people who have already faced the challenges you are going to face.
How does the brand encourage this support network?
How does the franchisor communicate with it's network? And how often?
Do they have any social media groups set up?
Q8 How do you help underperforming franchises?
There are no guarantees in business and it's the same when you invest in a franchise license. Yes, you likely have a greater chance of success, but what if it goes wrong for some reason?
What does the franchisor do to help and what are they currently doing to support their existing franchisees who perhaps aren't achieving the expected level of success?
There could be many reason why they are struggling, but if the franchisor doesn't give you a good answer to this question, it should set off some alarm bells for you.
Q9 What is the process for selling on my business?
Ok, so you haven't invested just yet, but you should be planning for the future. Creating an exit strategy is a must for any business you start.
It will give you something to aim for and you can start to make sure that you are installing processes into your business that makes for an easier sale.
Understanding how other franchisees have moved on from the agreement and what the franchisor can do to support this is very important.
Q10 What makes a successful franchisee?
An ethical franchisor will want a franchise partner who has a great chance of succeeding. It strengthens their brand, increases their profits and reduces the risk of disputes.
They should really be clear on who they are looking for and what it takes to build a high performing business under their guidance.
If they don't really care about who you are and the skills that you bring to the table, it's a warning sign that the franchisor is just looking to sell licenses rather than develop a long term mutually beneficial relationship.
As mentioned earlier there are many more questions you could ask and the franchisor will respect you more for asking as many questions as you need to.
From a franchisors perspective they want highly engaged individuals to invest in their brand who are excited and committed to their new business venture. Going to a meeting underprepared and without any questions could put you at risk of not being awarded a franchise.
If you need any support in your search for the right franchise for you you can always get in contact with us on info@thefranchised.com or check out our guide "How to choose the right franchise for you".
Good luck!
SUMMARY
So there we go, hopefully this has been useful and we wish you all the best in your search.
We hope that this guide has helped you during your initial steps to find and choose the best franchise for you..
Whatever your thoughts are after reading this, don't forget that there are many places you can research the industry and the brands that you may be considering. Take your time and choose wisely.
Even if now isn't the right time for you, or you can't find the right brand, the knowledge that you have gained from these conversations will hopefully help you to make good decisions in the future when an exciting opportunity does catch your eye.
Here's one final thought for you to consider...
There are many statistics flying around the internet, each with a different statistics about franchise success rates. Each one though clearly states that franchises succeed over start ups as a general rule, so it's something to bear in mind as you plan your next move.
Good luck!
This guide has been brought to you by The Franchised. If you would like to discuss anything franchising, please don't hesitate to contact us!