Ready to buy?

by Administrator - Faredge

Ian Krawitz
Head of Intelligence
15 questions you
should ask a franchise
business before
signing the paperwork

Ian Krawitz

Ian Krawitz | Head of Intelligence | 10 THOUSAND FEET

Question 1:
How will Franchise Support Staff mentor me to be a success and guide me through problems that come up?

One of the advantages of buying a franchise business opportunity opposed to starting a business from scratch is the support you can expect from the franchise system. While every franchised business will tell you that they have a dedicated support team, the quality of support given can differ drastically from one system to another.

Question 2:
How will Franchise Support Staff personalise support for my business?

Staying within the broad topic of support, the next question that arises is how flexible and adaptable the support team is. Every franchisee will bring a different set of skills and experiences to the table. Similarly, every unit will be slightly different to the rest depending on factors such as its location, staffing requirements and set-up. It is, therefore, not only important that there is a good support structure in place but also that it can be adapted to individual situations.

Question 3:
Do the Franchise staff selling me the franchise listen to my needs?

We have all been sold something before that we actually didn't want or didn't need. While it is frustrating no matter how little we paid for the unwanted item, it can be quite disastrous if this happens with a high cost and commitment item such as buying a franchise.

The best franchise business opportunities will not just take anyone who is willing to pay. They will make sure that the franchisee and the business are right for each other to save the prospective franchisee and themselves grief. So, it is a good thing if the representative of the franchise business you are speaking to asks you questions on your background, your professional experience, your goals and ambitions.

Question 4:
How well known is the Franchise brand in the area I am looking to operate in?

One of the main reasons for people to become a franchisee is that they can leverage of a well known and trusted brand name. It can take years to make yourself known and build a reputation on your own. So, franchise opportunities allow you to fast track this process provided that the franchise system has done its homework and looked into brand awareness in the area you are looking to operate in. The level of local area marketing that will need to occur to generate business will depend on the level of knowledge and the reputation of your offering in the area.

Question 5:
How does the Franchise differentiate its product, service and experience to make it different to other businesses?

It is important to identify what your prospective franchise opportunity's offering is and what it is that sets it apart from your competition. You will make your living from what you are offering, so your success will depend on the demand for your products or services.

Question 6:
What research methods will the Franchise use to help me select a location to operate in?

Location, location, location: are you going to be at the right place at the right time and how is the franchise business going to define "right"? Ideally, "right" should be backed by some solid research into the demographics of the location. These need to be representative of your target audience. Otherwise, you will struggle to sell your offering. The characteristics of the locations of current franchisees that run their business successfully will give you an idea what a good location looks like and where you will be more likely to be successful yourself.

Question 7:
What research methods will the Franchise use to conduct ongoing research in my customer market?

Over the last 12 -18 months, we have seen consumer behaviour shift dramatically due to the economic turbulence. People buy for very different reasons and base their decisions on very different factors than they did at the end of 2008. Not many companies can afford to keep offering the same product or service lines regardless of what happens around them. It is important that your head office is sensitive to changes and proactive in understanding the customer market overall and in specific areas in particular.

Question 8:
Please explain to me how easy the business model is to operate.

The easier the business model of the franchise company is to understand, the easier it is to follow. The business system has been put in place to make operating the business for franchisees as simple as possible. Many franchisors have reported that franchisees who follow the system are more likely to be successful than franchisees who don't. Put the franchise company you are interested in joining to the test and let them explain to you how easy the business model is to operate. If you can't understand how it is meant to work in practice, you may struggle to follow it once you have purchased your franchise.

Question 9:
Can you please give me examples of how different franchisees have performed financially?

Asking for multiple examples of financial performance increases your chance to see a good cross section of performance levels and to get a realistic idea of what you can expect from your business if you put in the effort. This is also a good opportunity to ask the franchisor how the franchisees achieved good margins.

Question 10:
What guidance do Franchise Support staff provide to help me monitor the financial performance of my business?

Not all of us are trained accountants and some of us are better with numbers than others. Nevertheless, keeping control of the financial performance is vital for every franchisee to be successful. Support staff should assist you with the task of tracking your financial performance to make sure that you make financially sound decisions. Support staff need to have the appropriate level of experience and training to be able to assist you on that level. You will receive the most qualified support with your financial performance if there are trained accountants and/or financial planners in the support team.

Question 11:
For the upfront Franchisee fee that I pay, what services will I get from Franchise Management to help me start my business?

You may find that the franchisee fee is one of the hardest points comparison between franchise business opportunities. This is because every franchise business will include and exclude different items. To compare apples with apples, you will have to identify what the fee includes and what other costs you will need to cover setting up your business.

Question 12:
What do I get in return for the ongoing royalty fees I have to pay to the Franchise and or for the products I have to buy from the Franchise?

This is another value for money question that will need some attention since the agreements vary from franchise opportunity to franchise opportunity. Franchise companies either charge a flat or percentage based royalty fee to their franchisees or will legally bind their franchisees to purchase products only from the franchisor. In return, franchisees receive services such as training and support from the franchise company.

Question 13:
What ongoing services will the Franchise provide me to help me continually improve my business' performance and personal skills?

Every business owner, franchised or solo, will agree that a business is continuously progressing, adapting, inventing and re-inventing. Of course, initially, the main challenge is to get your head around the day to day business. But even once you have established your routines, you will be faced with new challenges on a regular basis. Depending on your own and your franchisor's ambitions, you may even seek new challenges yourself, for example, by taking on multiple units or a mentoring role to pass on your experiences to new franchisees.

Understanding what ongoing services will be provided to you to help you master and excel at your day to day business as well as to be able to take on new challenges is crucial since this is going to shape your professional future.

Question 14:
How much of the money I contribute to marketing will be used for local area marketing? And how will you help me to use this money effectively?

Marketing is a must do activity for every business, so it is important to understand how the franchise business is set up in this regard. Most franchise businesses will charge a marketing levy and take care of national branding and awareness campaigns. Local area marketing is often left to the franchisees themselves with varying levels of support from the head office. Some franchise systems charge a lower marketing fee but will require you to spend a certain percentage of your earnings on your local area marketing. Considering the importance of it, this is not a bad thing.

Having the money to spend is only one side of the coin though. Not all of us are trained marketing specialists or can afford a hit and miss approach to find out what works best. Therefore, we would recommend to you to ask whether the franchise business gives you access to assistance in using your local area marketing funds effectively.

Question 15:
Last but not least, question 15 is a question to ask one or more existing franchisees.

Would you recommend that a friend or business colleague of yours should become a franchise owner in this franchise system?

The power of this question lies in the wording: asking if they would recommend the franchise business to a friend or colleague is different to asking whether they would recommend the franchise business to you - unless you are a friend or colleague of theirs. While they may find it easy to recommend the franchise opportunity to you, they may think twice about recommending it to a friend or colleague since they are putting their social reputation on the line. So, this question is a fantastic way of gauging their real sentiment towards the franchise business.

We ask this question in our satisfaction survey. You can find the top 10 franchise business opportunities for their franchisees' willingness to recommend the franchise business to their friends and colleagues in the Top 10 in Different Categories section under "refer".

These questions have also been compiled in a workbook format. Click here to download your free copy of the workbook and feel free to use the workbook when you speak to a franchise business.

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