The Five Most Important Questions to Ask a Franchisor Before Buying a Franchise

April 13, 2018 / starting a franchise,

Before buying a franchise, the most important questions to ask are, in no particular order:

1.Why do you think I would make a good franchisee?

This question will reveal two crucial bits of insight. The first is what sort of criteria the franchisor looks for in its franchisees, and the second is how, in the eyes of the franchisor, you meet these criteria. Having gleaned this insight, you can then evaluate yourself to see whether in your own estimation you have the qualities that it takes to be a successful franchisee under this brand.

2. How much money do most franchisees make?

This is obviously crucial, as it will give you an idea of how much money you yourself can hope to make should you become a franchisee. You can also piggyback off this question to ask deeper questions in order to narrow the estimate down to match your business profile. For example, ask how much money other franchisees in the state or in the city make, or franchisees who have a target market of a similar size.

3. How involved will you be after the initial training?

It’s important to know the level of autonomy that you will have once the business is up and running. The purpose of this question is to gain as much knowledge as you can about the freedom you will have to make decision that pertain to the running of the business as well as about the resources at your disposal when you are unsure of what to do.

4. What will my territory be, and do I have exclusive rights to it?

This is an important one that people often overlook. In the year 2009 when Starbucks closed down 600 of its stores, a lot of people shook their heads in wonder. Starbucks is extremely popular, is it not? It is, but the problem was that they had opened so many locations that they were taking business away from one another. Ask how big your territory is and if your contract grants you exclusive rights to it, meaning that your contract prohibits the franchise from openeing up other locations within that area.

5. Is the franchise financially stable?

It is unlikely that the success of any one location can save a failing franchise. Knowing how well the entire brand is performing will help you understand how well your business is doing outside of the elements which are in your control. As a franchisee, you are an organ of a larger functioning body; as such, the body benefits from having you, and you benefit from being part of it. As such, you cannot function for very long if the body isn’t healthy.

What are some other important things to consider when buying a franchise? Let us know in the comments!