5 Questions to Ask a Franchisor Before Buying a Franchise
To make an informed decision about a franchise opportunity, you need to make sure you have gathered as much information as possible. When you are first investigating franchises, it can be hard to figure out what questions you should ask. Franchisors are happy to answer your questions, but how can you tell if you’re asking the right ones?
To help you find out if a particular franchise is right for you, we have put together a list of the top 5 questions to ask a franchisor:
1. How Much Money Can I Expect to Earn from this Franchise Opportunity?
It goes without saying that this is one of the most frequently asked questions for franchisees. However, there isn’t a definitive answer, because each franchise will vary in profit depending on factors like the economy, the specific territory, and the owner.
Nevertheless, franchisors must include “financial performance representations” (FPRs) in the Franchise Disclosure Document (FDD) under Item 19. This information should give you a general idea of what to expect when it comes to new franchise revenues.
2. How Much Will the Franchise Cost Me?
When it comes to questions to ask a franchisor, don’t be shy about asking this one! In addition to asking about the overall investment, ask for details about initial setup fees and ongoing franchise fees. It is also important to consider how long you will need to run the business before you make a profit. Ask the franchisor what the average time is from when a franchise opens to when they start to break even.
3. Where Are the Other Franchise Territories, and Will Mine Be Protected?
To get a feel of the franchise’s level of success, it is worth asking where the other franchise territories are and how successful they have been. The franchisor may have a large number of units, but how successful are those units?
You will also want to ask how your own territory will be protected. For example, will you have exclusive rights to the territory? Where are the territorial boundaries, and how is protection provided or enforced?
4. What Training and Support Will I Receive?
One of the main benefits of being a franchisee – if you choose the right franchisor – is the amount of ongoing support you receive at startup and throughout your contract. Therefore, one of the top questions to ask a franchisor is what type of support you can expect. For example, will regular training opportunities be provided to you, and is any on-site assistance available after the initial setup?
5. Do You Offer Any Discounts or Financing Options?
Money-related questions are crucial when you are thinking about opening a franchise, so don’t be afraid to push for as much information as possible. Many franchisors will provide discounts for certain groups, such as veterans, while others may offer deals for people opening franchises in particular territories the franchisor is eager to get into.
You may also want to ask what financing options they have, if any. A lot of franchisors have preferred lenders, so ask who these are so you can get in touch with them. Many lenders are more willing to offer loans to franchisees who are entering into a franchise opportunity that the lender is already familiar with.
These are just some of the most important questions to ask a franchisor. The International Franchise Association has also put together an extensive list of questions, which cover everything from products and services to advertising and marketing.
Learn about franchise opportunities with the Neighborly family of home service brands. If you’d like to contact us, we’ll transparently answer all these questions for you – and more – and explain the comprehensive ongoing support we provide for all our franchisees.
Already a franchisee? What questions did you ask your franchisor before signing on the dotted line? We would love to read your comments below!