20 Essential Questions to Ask a Franchisor
Michael Nicholas / Franchising / May 30, 2023
There are more than half a million franchise opportunities available in the United States to entrepreneurs who are interested in opening one. Having so many options can help business owners guarantee they find the right one, but it can make the decision process quite challenging.
When deciding which franchise opportunity is right for you, there are steps and questions to help you narrow down your choices. First, define your goals and criteria. Next, consider what you’re passionate about, determine what kind of investment you’re willing to make, and identify your strengths. Then do some research and find potential franchises that align with your desires.
From there, you’ll still be met with countless options. At this point, you’ll want to evaluate the franchisor. The goal is to determine the franchise’s reputation, track record, and profitability. First, you’ll look over each franchise disclosure document which highlights the financial history as well as clearly defines the business relationships. These documents make it easier to compare different franchise opportunities.
From there, it’s time to dig even deeper and develop a list of questions to ask franchisors.
If you’re unsure where to start when it comes to questions to ask before buying a franchise, we’ve come up with a list to help you get going. These questions can help potential franchisees better understand the franchisor’s business model, costs, training and support, operational standards, and growth potential. It’s critical to thoroughly research and evaluate a franchise opportunity before making a significant investment.
This is one of the most important questions to ask a franchisor because it can help you determine how well-established their business model is. While some new franchises may still be successful, one that has been operating for a long time will give franchisees more confidence that they will provide excellent support and training.
Asking about the number of franchise units a franchisor has can help gauge the franchisor’s success and credibility in the industry. For example, if a franchisor has many units, it may indicate that the opportunity has a proven business model and has successfully attracted other franchisees. Conversely, with fewer units, the franchisor can offer more individualized support and attention. There may also be more territory available for expansion. Additionally, being an early adopter of a new franchise system may offer greater potential for profitability as the brand gains popularity and recognition in the market.
Knowing the number of corporate-owned units a franchisor has can help provide insight into how invested the franchisor is in its business model. Franchisors with a significant number of corporate-owned units demonstrate their commitment to their business model and prove that they have confidence in their brand. This is one of the franchise questions to ask that can also help identify potential conflicts of interest between corporate-owned units and franchisees.
Asking about the number of franchisees that have left the system in the past year is another one of the most important questions to ask when buying a franchise. High turnover rates could indicate issues with the business model, insufficient support, or other problems that could negatively impact your success. Understanding why franchisees left the system is essential, as it could potentially point to underlying issues. By asking this question, potential franchisees can gain insight into the stability and sustainability of the franchise opportunity.
The initial franchise fee and ongoing royalties are two key financial components to consider when evaluating a franchise opportunity. Awareness of the costs associated with a franchise opportunity is crucial to ensure it is financially viable and sustainable long term. It’s a good idea to ask this question early on in the evaluation process, as it can help potential franchisees narrow down their options and determine whether the franchise opportunity is within their budget.
The franchise fees are not the only upfront costs of opening a franchise. Another one of the important questions to ask when buying a franchise is what other start-up costs are there. Start-up costs include a wide range of expenses, such as franchise fees, equipment, inventory, advertising, etc.
Starting a franchise can be a significant financial investment, and many potential franchisees may require financing to get started. Franchise companies may have relationships with lenders that can offer financing options specifically tailored for their franchisees. It’s important to know what financing options are available, such as SBA loans, traditional bank loans, or other types of financing, to determine whether they are feasible and meet your financial needs. By asking this question, potential franchisees can determine whether they can afford the franchise opportunity and how best to finance their investment.
Franchisors often provide comprehensive training programs for new franchisees to ensure that they are prepared to operate the franchise successfully. The training may include classroom instruction, on-the-job training, and ongoing support. Understanding the type of training that is provided and the duration of the training program can help determine whether the potential franchisee has the necessary skills and knowledge to operate the franchise.
Asking about the duration of the training program is an important follow-up question to ask when inquiring about the type of training provided to new franchisees. The duration of the training program can vary depending on the franchisor and the complexity of the business. Some training programs may last a few days or weeks, while others may last several months. Knowing the length of the training program can help potential franchisees prepare for the time commitment and plan their schedules accordingly.
Franchisors may offer a range of ongoing support services, such as marketing and advertising assistance, product development and innovation, ongoing training, and field support. Knowledge of the type and level of ongoing support that is available can help potential franchisees determine whether they will have the resources they need to operate their franchise successfully.
This is another one of the more important questions to ask when buying a franchise regarding training. On-site assistance can be valuable in helping franchisees navigate the complexities of opening a new location, including coordinating the installation of equipment, ordering inventory, training staff, and launching marketing and advertising campaigns. Having this support can help new franchisees avoid costly mistakes and ensure a successful start to their business.
Effective marketing and advertising can help attract and retain customers, ultimately driving revenue and profitability. Therefore, franchisees should ask the franchisor about marketing and advertising support, including national or regional advertising campaigns, social media and digital marketing initiatives, and local store marketing programs. Also, franchisees should inquire about the costs associated with these initiatives, including any required contributions to a national or local advertising fund and any fees for participating in promotional programs or events.
Understanding what is required of you is just as important as knowing what the franchisor offers. Franchisors typically have specific operational standards that must be followed in order to maintain consistency and quality across all franchise locations. Franchisees should ask the franchisor about their operational standards and their responsibilities in terms of adhering to these standards. This can include requirements for staffing, training, equipment, inventory management, and customer service, among other things.
Maintaining consistency across all franchise locations is essential to the franchise system’s success. Franchisees should ask about the quality control measures that are in place to ensure consistency, such as regular inspections, mystery shopping programs, and ongoing training and support.
Some franchises may require set hours of operation to maintain consistency across all units, while others may offer flexibility in setting hours. It’s important for franchisees to consider their personal preferences and lifestyle when evaluating franchise opportunities that may have specific requirements for operational hours.
Franchisees need to know the expected number of employees and their qualifications, as well as any required training programs. It’s also important to inquire about the hiring and firing processes and whether or not the franchisor offers any assistance with staffing.
Franchisors often grant exclusive territories to franchisees, which means that the franchisee has the sole right to operate within a particular geographic area. Understanding the territory or market area that is available for each franchisee can help determine the potential for business growth and expansion. It’s also important to know whether the franchisor plans to expand the franchisee’s territory or whether other franchisees may be granted overlapping territories.
When coming up with questions to ask before buying a franchise, you obviously want to get a sense of how much money you can make. Asking about the average annual revenues for franchise units is an important question to understand the potential profitability of the franchise opportunity. It is important to get a clear grasp of the revenue potential for the business and whether it aligns with your financial goals. Be sure to also inquire about the factors that impact revenues, such as location, competition, and seasonality.
Just as important as revenue is expected profit margins after all business expenses are deducted. This information can help you determine the return on investment and the long-term viability of the business. Profit margins will vary depending on the industry, but it’s important to ask the franchisor for an average profit margin for their franchise units.
Plans for future expansion could ultimately impact the profitability of your franchisee. Additional units may mean an over-saturated market or room for you to grow with second and third locations. Additionally, understanding the rate of growth can provide a sense of the franchisor’s financial stability and whether or not they have the resources to support their franchisees.
When evaluating franchise opportunities, the questions to ask before buying a franchise can help you better understand the specific details of the business model, including the types of services offered and the level of support provided to franchisees. One franchise opportunity to consider is P3 Cost Analysts, which provides cost reduction consulting services to businesses across a wide range of industries.
The franchise offers a turnkey business model with a proven system of generating leads, conducting assessments, and implementing savings strategies for clients. P3 Cost Analysts franchisees work with businesses across a wide range of industries, including manufacturing, healthcare, hospitality, and more.
In addition, franchisees receive extensive training and support, including initial training, ongoing coaching, and access to proprietary software tools. The franchise also provides a comprehensive marketing and advertising program to help franchisees attract and retain clients.
With a low initial investment and the potential for high returns, the P3 Cost Analysts franchise opportunity is an attractive option for those looking to start their own cost reduction consulting business.
When evaluating franchise opportunities, it’s important to ask the right questions to determine whether a particular opportunity aligns with your goals and expectations. This list of franchise questions to ask is a perfect place to start, but be sure to come up with more questions of your own.
All in all, getting answers to these questions is the best way to evaluate different franchise opportunities and take a step back and assess whether the franchise makes sense for you as an individual.
At P3 Cost Analysts, we’re more than happy to answer all the franchise questions you can think of. To get started, fill out the form on our franchising page or us at 1-877-843-7579 today.
