Seventy-One Questions To Ask Franchisors

During the Franchise Discovery Process it’s important that you get a well-rounded perspective of each franchisor that you speak with. The key to doing this is knowing what questions to ask.

To help you with, we have put together a list of seventy-one questions to ask franchisors, that will help you conduct a thorough Due Diligence and show the franchisor that you are a serious and intelligent prospective franchisee:

Questions About The Franchisor:

  • When were you established?
  • How long were you established before you started franchising?
  • How many company owned units do you currently have?
  • How many people do you have in head office?
  • What support functions do they cover?
  • What support do we get as franchisees?
  • How many franchisees do you currently have?
  • How many franchisees do you aim to take on a year?
  • How do you choose your franchisees? What specific skills and traits do you look for?
  • What are the skills and traits of your most successful franchisees?
  • Are you able to provide franchisee testimonials and references?
  • Are you happy for me to speak with existing franchisees as part of my discovery and validation process?
  • Will you be able to provide a full list of franchisees with contact details?
  • How many franchisee failures have there been in the last three years? What were the cause of these failures?
  • Are you a member of the British Franchise Association? If not, why not?

 

Questions About The Financials:

  • What’s included as part of my franchise fee?
  • What other costs will there be in addition to the franchise fee? What do these costs cover?
  • How much working capital will I need to get the business setup?
  • How much capital will I need outside the franchise costs and working capital?
  • How much are the royalty payments and when are they due?
  • How are royalties paid?
  • Will there be any other on-going costs other than the royalty?
  • Do you have a marketing fund? If so, how much will I be expected to contribute?
  • How long does it generally take to reach a level of break-even? Profitability?
  • What are the average gross profit margins? What costs will I incur in arriving at net profit?
  • Will you help me build an activity plan to reach my target level of income?
  •  Will my franchise business have a resale value?
  • Can you provide a copy of the financial statements for the franchise?
  • Can you provide anonymous financial reports for your franchisees?
  • How have unit projections been compiled? How realistic are they to my chosen territory?
  • What relationships do you have with high street banks?
  • Do you provide financing for the franchise fee? If so, what are the terms?
  • Do you have preferred suppliers for raising franchise finance?

 

Questions On The Business Model:

  • What are the revenue streams for the business?
  • Do you take any commission on supply of goods or materials to a franchisee?
  • Do I have to purchase all or selected items from you? Does this apply to equipment?
  • Will I be obliged to maintain a minimum fee or minimum purchase of goods? What happens if I fail to meet this commitment?
  • Will I be obliged to purchase products or services from preferred suppliers?
  • How often do you review these suppliers to ensure they provide the most value?
  • What preferential rate do franchisees get from these suppliers?
  • How much do you spend on advertising and promoting the services of the franchise? Do I have to contribute to it? If so, how much?
  • How is the training structured? Where do I go for training?
  • What support do you provide after training?
  • In what format is the operations manual? Was this created in-house or by an outside professional?
  • What happens if I don’t meet my projected targets?
  • How will you help ensure that I meet my expected targets?
  • What happens if I don’t meet my minimum targets?

 

Questions On The Franchise Agreement:

  •  How long is the franchise granted?
  • What happens at the end of this period?
  • Is there an option for renewal at the end of this term? If so, what costs will I incur?
  • Am I able to sell my business? If so, what restriction will I have?
  • Can I see a copy of the franchise agreement?
  • Has the franchise agreement been prepared by a franchise lawyer?
  • What are the key restrictions that I should be aware of?
  • What happens if I decide that the franchise is not for me?

 

Questions About The Ongoing Support:

  • Which members of the head office team will I be dealing with daily?
  • How will they support me?
  • Will I get to meet my main point of contact during the discovery process?
  • How often can I expect to hear from head office?
  • Will you perform regular audits on my performance? If so, how often? Is this the same for all franchisees?
  • What mentoring do you have available for new franchisees?
  • How much time do I get to spend mentoring with existing franchisees?
  • How often do franchisees meet at conferences or regional meetings? What are the costs associated with these events?

 

Questions On Sales And Marketing:

  • What sales and marketing activities do you include in the franchise fee for launching a fresh territory?
  • How do you support franchisees in marketing their business locally?
  • Do you provide a centralized website? What about a local website?
  • How are you using social media to grow the franchise network?
  • Do you provide centralized social media support or am I responsible for running my own social media locally?

 

Questions On Franchise Territories:

  • What happens if I get a customer outside of my territory?
  • Am I able to purchase a second territory should I maximize my first?
  • What happens with national accounts?

 

See an overview of the Franchise Discovery Process here

If you are interested in learning more about the possible opportunities in franchising, please schedule a time to speak with one of our Franchise Search Consultants and let us help you take the next step into business ownership.

 

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