Important Questions Potential Franchisees Should Ask

by Eric Little

Becoming a business owner is one of the most exciting experiences anyone could embark on. But it can also be one of the scariest. That’s why many entrepreneurs turn to franchising. Offering a proven system and an opportunity to excel in a field where you may have little prior experience, owning a franchise can be an easy way to become a first time business owner.

After you’ve read the FDD and you are diving into your due diligence, there are some things you should consider before signing the dotted line. Eric Little, Right at Home’s VP of franchise development, takes a look at some important questions potential franchisees should be asking. Take a look at his perspective below.

Do you enjoy following a system?
Most people appreciate the proven systems offered by franchises, and all the accompanying checklists and procedures that have been fine tuned for years based on market needs and changes, and on feedback from the franchisees that have been using them. They reduce risk, streamline business operations, and shorten the learning curve for new franchisees discovering an industry that is often new to them. But not everyone excels by using these systems. It’s not that these “other” people don’t like the checklists and procedures– they do, in fact, like those tools. The problem lies with their desire (and, in some cases, their need) to create those systems themselves, or at very least to have the ability to change them without concern for how their changes might impact the entire system. If you are one of those rare, often very creative people that must do things differently from others, being a franchisee will likely be very uncomfortable for you. Conversely, if you’re thinking you’d like to own a business, and you don’t want to waste time and money reinventing the wheel, franchising is probably a good fit for you.

Do you have the support of your spouse/partner?
Some will tell you that being single is easier, but that’s a question for a different blog! At Right at Home, we have several Franchisees that are single, with no kids or spouse to consider as they consider business ownership. Most, though, have spouses and kids that must be considered as part of this big decision. Having the support of your spouse and family is critical when contemplating business ownership. Conversely, moving forward without their support is a recipe for failure. You will need their support to get you through the startup phase of your business, and beyond. Your spouse and family don’t have to be active in the business, but they do need to be active in their support of you. Talk about your definition of “support” with them and what that means. Also, before signing a franchise agreement, talk with your spouse and anyone else who will be affected by your decision and make sure they understand the commitment necessary to get a business off the ground. Make sure they understand the potential changes in your relationship with them during the short term, but also be sure to include them on your long term vision and what you hope to gain by doing this. If your spouse isn’t on board with your vision, do not sign a franchise agreement. You must decide where you both want to go first; then, you can figure out the best way to get there – which may or may not include business ownership.

How much will this cost me?
It’s no secret that businesses that are undercapitalized often fail. Therefore, it’s critical to have a solid understanding of the total investment required, as well as an educated guess on the best and worst case scenarios. Read Item 7 of the FDD carefully, and talk to the franchisor about it in detail. Then, validate what you hear by talking with some existing franchisees. Also, be sure to understand how long it will take to get from break even to replacing your current or most recent income level. It’s not likely that you’ll go from breakeven to profiting $6,000 per month, so be sure to understand how long that can take. Other impacts on cost can include real estate costs, initial franchise fees, equipment and fixtures, facility build out, and many others. The key is to make sure your total investment matches up with what you actually have to invest, along with a cushion in case things don’t go exactly as planned. Also, due to the instability in the U.S. and world economies right now, many franchisors are offering in-house financing. And some offer discounts for minorities and veterans. These discounts are usually disclosed in the FDD, but always ask the franchisor just in case.

What type of training will the franchisor provide?
The wonderful thing about franchising is that it affords you the opportunity to own a business in a field that you are passionate about, but one where you may not have previous experience. Either way, it is important to find out what training you can expect from the franchisor. For instance, Right at Home, offers an extensive 2 week owner’s training class to franchisees who want to provide exceptional home care to seniors, in addition to short and long term ongoing support. Upon completion of the training class, franchisees walk away with everything they need to know about how to run a home care business.

What type of marketing will the franchisor offer?
Marketing is an essential tool to getting any business up and running. With the corporate backing of a franchisor, franchisees will have marketing materials at their fingertips that have already been tried and tested. Franchisees also benefit from the recognizable branding of a franchising along with its trusted reputation. The marketing materials and service provided to a franchisee will be crucial in continued brand recognition and establishing their own reputation for quality in their local market. Right at Home offers their franchisees ongoing marketing training and support to grow locally. The franchisees also benefit from marketing campaigns that further the reach of the brand on a national scale.

Is your desired territory available?
Often times franchisors know where they want to grow and that might not always match up with where a franchisee would like to be located. It’s important to ask yourself if you are willing to relocate or commute to open your franchise if your desired territory is not available. This should be one of the first questions you ask any franchisor.

These are a few questions you should consider and ask during the process of deciding if owning a business is right for you. Once you go through the due diligence process and go to discovery day to meet with the corporate team, the decision always comes down to is this franchise the type of business that you want to be part of? Is this system and brand the right fit for you? After finding out all of the support that a franchise provides, you need to make sure that you like the corporate team and believe in the systems and procedures so you can represent the brand to the fullest capability. You need to feel comfortable working with them to ensure the optimum level of business success.

Eric Little
VP of Franchise Development
Right at Home

Learn more about Right at Home at topfranchises.franchisebusinessreview.com.

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