Questions to ask before you purchase a Franchise

Questions to ask before you purchase a Franchise

When investigating franchises to purchase it is vitally important you ask the right questions to representatives from the brand.

Here are seven questions to keep in mind when conducting due-diligence on franchise opportunities:

1. What makes your brand better than the competition?

– As a potential franchisee and business operator you need to know and believe in the competitive advantages your brand claims to offer.

2. What are the costs associated with your franchise?

– When purchasing any business the numbers are everything. Get a grip on startup and ongoing costs of the franchise system. Ex: Franchise Fee, Build out Costs, Royalty, & Marketing Fund.

3. Can you explain the training program & ongoing support?

– The reason to purchase a franchise is the operational “playbook” the brand offers. Without a sophisticated training program and documented systems the franchise offers little benefits.

4. Do you offer assistance with real estate?

– Location is one of the most important factors in any business, it is extremely important to leverage the knowledge and experience of the Franchisor.

5. What is my protective area?

– Understand where you will have the right and protected area to conduct business under the brand.

6. Can I see the FDD?

– The Franchise Disclosure Document (FDD) will lend information on the history of the company, executives, ownership structure, any litigation’s/bankruptcies, fees associated, assistance/training, territory, trademarks/patents, financial performance representations (be careful with these), and financial statements of the Franchisor.

– Under the Franchise Rule, which is enforced by the Federal Trade Commission (FTC), a prospective franchisee must receive the Franchisor’s FDD at least 14 days before they are asked to sign any contract or pay any money to the Franchisor.

7. Is there a current Franchisee I can speak with?

– The Franchisee can provide you with insight the franchise sales representative cannot. The Franchisee is able to speak about the numbers related to the performance of the business, discuss support the Franchisor provides them, and offer unbiased reviews of what it is like to be a franchisee. Maximize your time speaking with current franchisees.

These 7 questions are a starting point for investigating franchise opportunities. It is important to conduct your own research and speak with multiple brands before deciding which franchise to purchase.

A franchise is very much a marriage (at least for ten years- in most cases) make sure to “date around” before proposing the brand of your dreams.

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Ryan Rao is a Principal of Apex Franchise Development Group and is a franchise development expert who has grown multiple franchise based businesses into national and international brands. Franchising has allowed him to help individuals realize their dreams of business ownership, while permitting them to experience the independence, flexibility, and freedom that comes with being a business owner. He also serves as a franchise consultant, and is a personal growth advocate.

Follow or Connect with Ryan on LinkedIn at https://www.linkedin.com/in/ryan-rao/