Questions to ask a franchisor

Posted on 28th May 2016 at 4:10pm by Carl Reader in Business

There are a range of questions that you should ask any franchisor before committing, and some of my suggested questions are as follows. I don’t suggest that you reel all of these off, instead you should review the list to help you think about the types of questions that you should ask:

  1. How long have you been in business?

  2. How long have you been actively franchising your business?

  3. Did you run a company owned pilot operation?

  4. How many franchisees do you have operating?

  5. How many franchisees do you take on per year?

  6. How do you select your franchisees?

  7. How many franchise failures have you had?

  8. What are the reasons for any franchise failures?

  9. Can you provide a complete list of franchise locations?

  10. Can you provide any references?

  11. Can you provide your (franchisor) financial statements?

  12. Can you provide anonymised benchmarking information / financial reports for your franchisees?

  13. How have your projections been compiled? Are they based on a territory similar to mine?

  14. Have you taken professional advice in respect of the compilation of projections?

  15. Do you have arrangements with any of the high street banks?

  16. Do you have any referees that I can speak to outside of the franchise network?

  17. Are you a member of the British Franchise Association? If not, why not?

  18. How much is the initial franchise fee?

  19. What level of training is involved? What is the fee for this? Is there any supplementary training once I’ve got started?

  20. How much is the working capital requirement over and above the initial franchise fee?

  21. What is the ongoing management service fee?

  22. Are there any other monthly obligations such as a contribution to a central marketing fund?

  23. How is the central marketing fund spent?

  24. Are there any requirements to use centrally sourced suppliers?

  25. Is there any review of these suppliers to ensure that they provide the network with a good service?

  26. Do franchisees obtain a preferential rate from these suppliers?

  27. Do you accept commissions from these suppliers?

  28. What level of support can I expect from the head office team?

  29. Who are the head office team that I will be dealing with on a day to day basis? How are they trained, and will they have the experience to support me with my business?

  30. Can I meet my main contact at head office, if I haven’t already?

  31. How often can I expect contact from head office? How often can I expect a visit from a regional manager?

  32. Will you perform a quality control audit on me, and if so how often? Is this the same across the network? If not, how can I be sure that a neighbouring franchisee isn’t affecting the brand?

  33. Do you have any mentoring available to new franchisees? Can I spend time with existing franchisees to learn the ropes?

  34. How often do franchisees meet at conferences or regional forums? Is there a cost attached to these?

  35. How do you provide the operations manual? Has it been prepared by you or by a professional?

  36. What support do you provide me with in relation to promoting the franchise locally?

  37. Do you provide a centralised website or social media presence?

  38. What support do you provide should I wish to develop my business beyond my initial projections?

  39. What happens if I get a customer from outside of my territory? Am I able to purchase a second territory should I maximise the potential of my first?

  40. What happens if I don’t meet my projected targets in my business plan?

  41. How will you help ensure that I meet my business plan?

  42. What happens if I don’t reach my minimum performance targets?

  43. Can I see a copy of the agreement between us?

  44. Has the agreement been prepared by a BFA affiliated solicitor?

  45. Am I allowed to sell my franchise?

  46. Are there any restrictions on who I can sell my franchise to?

  47. How long is the agreement for?

  48. Is there an option for renewal at the end of the franchise term?

  49. Are there any key restrictions that I should be aware of?

  50. What happens if I decide that the franchise is not for me during the agreement?

The above list of questions is by no means comprehensive, and you might think of lots of others that are more specific to the business that you are looking at. The important thing is to ensure that you ask a range of questions about all areas of the franchise – starting with the buying process, right the way through to the end of the agreement; and covering various eventualities (both good and bad) in the interim.

The above is an extract from The Franchising Handbook, which is due for release later this year. Follow this link to pre-order and be one of the first to read it!

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