What are some of the important questions to ask a franchisor?

by FBR

There are many standard questions everyone asks a franchisor: Tell me about your training & support programs? What makes your marketing programs successful? How do royalties get paid? Like any interview, the trick is to ask open-ended questions that will catch franchisors slightly off guard and really make them think before they answer. When you show up for a discovery day or get face-to-face with a franchisor, here are a few questions to get you started:

1.) What characteristics make your top-performing franchisees successful and what is it specifically about my background that you think makes me a good fit for your system? This will let you know immediately if they have really done their homework on you and think you are truly a good fit for their system or if they are just looking to sell you a franchise. Listen carefully to their response. Make sure they are addressing items specific to you and not just general fluff.

2.) Even in the best business partnerships, disagreements and conflicts happen. If I become a franchisee and I have a problem in the future, what processes do you have in place to come to a fair solution that works for both of us? Can you give me a couple of recent examples of issues with franchisees and how they were resolved? Again, listen very carefully to their answer. It will be very easy to tell if they are giving you a genuine response.

3.) I know for the first few years, I will be very dependant on you and your staff to help me succeed as a franchisee and I think your fees are very reasonable given the support I will need. But in the future, when I am more self-supportive, where will I see the value from the fees that I am paying you? One of the obvious values a franchisee receives from an established franchise system is the brand and system itself. But brand alone will not justify the ongoing royalties you will be paying for the long-term. Look for specific examples of programs and services that the franchisor is continually introducing to the system to provide added value for their franchisees.

4.) What trends do you see in this industry that could have a negative impact on the business over the next decade and what are you doing strategically to overcome these challenges? Every business and industry has significant challenges to overcome in order to remain competitive. Look for honest and forthright feedback to real challenges. Not having the answer today is OK, as long as there is some strategic planning going on. But if the focus is only on positive trends and everything is “honky-dory”, this should be a big red flag.

Keep in mind that becoming a franchisee is the start of a long-term commitment and relationship. Franchisors expect that you will have a long list of questions you need answered. On the flip side, you should expect to receive lots of hard questions as well. Any good franchise system will be extremely selective about who they award a franchise to. If you are experiencing more of a sales process than a selection process, and feeling pressured to make a decision without being completely comfortable, walk away. There are too many better opportunities available to you.