It is absolutely prudent to ask the Franchisor as many questions
as necessary to ensure that you understand the complete picture of
the franchise arrangement and relationship, after all you are
entering into a partnership of sorts with the franchisor. So what
are some of the questions that should be asked?
- Ask About the Franchisor’s Business and
Network. How long has the Franchisor been using the
franchising business format? How many franchisees are there
currently operating in the network? What regions does the franchise
network extend across. How quickly or slowly has the franchise
network expanded over the years? How many franchisee business
failures have there been, and categorically what are the reasons
for such business failures? These sorts of questions will provide
you with some colour around the Franchisor’s network, success rate,
and approach to franchising. While it is not always the case, rapid
growth with high failure rates can be indicative of the wrong
approach to franchising. Alternatively, slow and steady growth over
longer periods of time can demonstrate depth of experience and
proper utilization of infrastructure to grow a successful
- The Business, the Costs, Methods and Training.
The Franchisor is likely to be, or previously has, operated one or
more corporate locations of the franchised business. So, in
addition to consulting with other franchisees, it is a good idea to
ask the Franchisor about operating the business, tips and tricks,
seasonal elements, best practice approaches etc. What kind of
working capital is likely to be required for the first year, and
subsequent years? Are all products to be purchased through the
Franchisor and, if so, does the Franchisor make a profit on such
supply? Is there a minimum purchase requirement with respect to
supplies. Is there an operations manual provided, how detailed is
it? What level of training is provided prior to opening the
business? What follow up mandatory and voluntary training programs
are available to the franchisee and its staff (and at what cost)?
The more support that the Franchisor provides the better the chance
- Location Location Location and Termination.
Everyone’s hope and desire is that the franchise business is a
success producing benefit for all parties involved. That said, it
is worthwhile having a clear understanding of the consequences and
options in circumstances where it doesn’t. How does the site
selection process work, who identifies and determines the site?
What happens if site selection turns out to be a poor decision?
What are the options in those circumstances? Will the Franchisor
permit a relocation? Who will pay for the costs, is it cost
prohibitive to relocate? How often are franchisees (or have they
been in the past) required to redecorate the site or replace
equipment? Is there an out in circumstances where the franchise
business is just not suited to your skills and abilities (contrary
to all previous evidence to the contrary)? What are the options in
circumstances where you want to terminate the franchise
relationship early? These are some tough questions that may not
spark the warmest of conversations with the Franchisor, but couched
in the right terms of wanting to make fully informed decision will
hopefully assist you in arriving at the right decision.
Learn more about the featured
franchise opportunities in your area.