7 must-ask questions when buying a franchise

By Sarah Stowe | 30 Nov 2016 View comments

Before you sign up to a franchise you’ll want complete confidence in the business model and the franchisor.

As part of the process of so-called due diligence (quite simply this is just thorough research of the business) franchisors will supply essential information about the business to the franchise buyer.

Even if everything looks right, it’s really worthwhile taking the time to source independent facts and figures, and to get feedback on what the franchisor has told you.

One way to get answers to some crucial questions about the business model is to ask franchisees themselves.

Franchisors will provide a list of past and present franchisees for you to contact and it is highly recommended that you make the effort to speak to as many as you can.

Talking to these franchisees on the phone is the very least you should do – visiting franchisees gives you even better insights.

Some things to consider

  • Most franchisees are likely to want to put a positive spin on the brand to ensure its value is retained
  • There will always be at least one unhappy franchisee in a network – and you want to hear from them to get a balanced view
  • Franchisees’ own personalities colour their experiences
  • If one issue is raised by a number of franchisees, it’s probably a concern in the network
  • Just because franchisees find fault with something, it doesn’t have to be a deal breaker if you believe you can live with it
  • Franchisees are busy business owners so you need to make best use of your time with them
  • Franchisees are unlikely to share secrets if you haven’t established trust first. Be respectful and lead up to the financial questions.

What should you ask?

Consistency is important (across the network and across brands) because it allows you to make comparisons. So put together a set of questions that cover all the burning queries that you have and apply them to every franchisee you contact.

Here are seven must-ask questions to get you started:

1. How effective was the support around opening the business?

What did the franchisor do practically to ease the start-up stage? How could they have improved that process? 

2. How relevant was the training?

Did you start your business well-trained? Have you been able to take up opportunities for continual learning? Have further training sessions proved valuable?

3. How good has the franchisor been at ongoing support?

What does the franchisor do to help you run and improve your business?  Have they fulfilled their support commitments?

4. Has the marketing been useful to you?

Does the marketing campaign have an impact on your business? Is it easy to work with and effective at engaging customers? Is it cost effective?

5. How good is your relationship with the franchisor?

Is there strong communication between you and the franchisor? Do you trust the franchisor’s decisions? Have you clashed with the franchisor – if so, what was the process for solving this and what was the outcome?

6. Have you had value for money?

Does the franchisor’s buying power result in savings for you? Do you think the franchise fees are well priced? Have there been extra costs you weren’t expecting?

7. Would you buy into this business again?

Purchasing multiple outlets or units of a franchise is another sign of confidence.

If you have queries following this research, take your concerns back to the franchisor to get their side of the story.