5 must-ask questions for your franchisor

By Nick Hall | 19 Jun 2019 View comments

Considering a franchise opportunity? Many advisors will tell you to ask your franchisor the hard-hitting questions, but what exactly are those must-ask questions?

Undertaking a comprehensive review of your proposed franchise model is essential to the due diligence process. Before you buy a franchise, or even before you get close to signing a deal, you should consult the franchisor for a detailed explanation of some key terms.

It’s easy to get excited by the prospect of a new opportunity, but you can’t let excitement cloud your vision, even if further investigation appears to be pumping the proverbial brakes.

The questions you ask your franchisor will have a large bearing on whether the franchise model is right for you. Their answers should be able to guide you in your decision-making process, so it pays to be prepared.

Here’s five of the most important questions all prospective franchisees should ask their franchisor.

1. What training is included in the initial cost of the franchise?

This will ultimately reveal the franchisor’s commitment to your ongoing success. In many instances, training is offered for a brief period before opening, but the mark of an engaged franchisor is ongoing, performance-related training.

Their answer will also help you to determine your overall investment cost. Some franchises will offer training at an additional cost to the initial investment, so it is important to factor this in to your costings.

Remember, a number of terms and conditions related to training and costs are negotiable. Don’t be afraid to fight for additional training or ongoing support prior to signing the agreement.

2. Do I have a preferred supplier?

If the answer to this question is yes, you must determine how restrictive this is and if the franchisor receives a small rebate as a result.

In many cases, the franchisor will require all supplies be purchased from an approved vendor, in order to maintain consistency across the network. If so, establish where the supplies are being sourced and your proximity to that location.

The last thing you want is a restrictive arrangement with a supplier based interstate or remotely. Should a delivery order be missed or arrive in unsatisfactory condition, you must be confident that a replacement will be deliver in a timely fashion.

Waiting days for a replacement delivery to arrive is drain on your financial prosperity and business reputation.

3. What marketing support is offered?

Will your franchisor provide an opening campaign to help kickstart your operation? Marketing is a crucial aspect of any small business; you’ll want to be confident that it is being covered.

More often than not, new franchisees are so focused on getting the operations running smoothly, they don’t have time to generate new interest.

Having a national marketing strategy, in addition to local area marketing support is the best way for new outlets to gain traction.

4. When did the business start franchising?

For first-time franchisees, it can be reassuring to know your proposed venture has a history of success. If the business has been operating in the franchising space for some time, it generally indicates a strong track record.

If the business has not been franchising for very long, that isn’t the be all and end all. Ask a follow up question; how long was the business operating before it began franchising?

The last thing you want is to be bound to a franchisor that is only just learning the ropes themselves.

5. How many of the brand’s franchisees renew?

This is ultimately the most important question in determining franchisee satisfaction, short of asking the franchisees themselves.

Be sure to ask for a visual representation, that way you can see any emerging trends in the renewal rate. If you identify that a number of franchisees are not renewing, try and find out why.

Franchisees opt not to renew for a number of reasons. It could be personal issues, new opportunities or something more sinister. Ask the questions!

Must-ask questions for your franchisor

Your franchisor should be there to support you through all aspects of the business operation, and that begins before any documents are signed.

Transparency is key in these early stages, and asking questions around the business’ history, costings and training will give you a deeper understanding of what you can expect moving forward.

Never be afraid to ask the question and always seek franchise legal and accounting advice.