Suggested Questions to ask FRANCHISOR
□ How many years of experience do you have in this industry? In this business? What is the previous relevant experience of the key people?
□ How many franchised businesses do you have today?
□ How many company-owned businesses/operationsd you run?
□ Has any franchised business of yours ever failed? What was attributed to the failure?
□ What do you see as the future of the industry you are in? Where does this company stand in its industry? What do you do to keep up with new developments?
□ Is there a viable market for the franchise’s product/service? Is there still room for growth? What is its marketing positioning, eg. price, image, quality? How do you maintain margins? How dependent is the business on price competitiveness? How good is the competition? These questions apply in all industries, from retail to lawn mowing.
□ What direction is the franchise company moving in? For example, is it adopting new technology as it becomes available/affordable? Is this important? How will new technology affect costs for franchisees?
□ What exclusive rights to a territory do I get? Can my territory be eroded by the franchisor? At a later stage can I sell off part of it if I choose to? How do you define a territory: eg, number of businesses, homes, geographical area, people, type of population? Do I get first option on an additional territory? What is the procedure if you plan to operate a neighboring territory?
□ Could you outline the process and the likely timing from here to starting operations, eg, assessments/interviews, legal, financing, shop-fitting, training periods with the franchisor and in the territory?
□ Who finds a site/conducts market research etc? How is it done?
□ What initial services do you offer?
□ Can I have a list of your franchisees? Can I contact them by phone and visit them if appropriate? May I choose whom I interview?
□ What are the total costs? Are they paid all in one go, or in stages? What is the timing? What do the costs include? What capital costs will be incurred in addition to this price, and what for? Check details of the franchise fee and other up-front costs such as training, legal and shop-fitting or vehicles, then the level of ongoing fees or royalties.
□ How much working capital (ie, cash to run the business, cover wages and other overheads) do I need?
□ Do you provide projections for my proposed business? Do you have an Item 19 – Earnings claim?
□ Do these figures take my salary/drawings and depreciation into account?
□ What assistance do you provide in obtaining financing? Does this business qualify for SBA loans(s)?
□ Have you have any any special arrangements with any banks? Please outline what these are. What level of cash and/or equity will I need to qualify for finance?
□ Do I buy or lease the necessary equipment? What are the options?
□ Do I have to buy all or just scheduled items from the franchisor? Are there any other fees? What levels of support or assistance do I get for the royalty?
□ How open are financial details within the franchise? For example, does the franchisor declare the level of any mark-ups or commissions paid by suppliers? Are the sales figures or financial results of other franchisees shared for purposes of comparison?
□ What are the profitability and cash flow projections for my market and others? Do you providing on-going comparison data?
□ What kinds of marketing programs do you run for the product or service offered by the franchisees? May I see examples? How are marketing program decided on? What kind of consultation is there with franchisees about what they want/need? What is the process for evaluating success?
□ What dollar value is spent on marketing? How is marketing funded? How accountable is the franchisor for the funds? Am I required to spend additionally on promotions in my local area? How much? Is supplier support available?
□ Do you have a launch package for a new franchised territory? What does it include? Who pays?
□ What help will I receive in arranging local advertising and promotions? Are there standard promotions (eg, tv or radio advertisements) available for my use?
□ Please show me examples of marketing material you provide, eg, point of sale material and promotional literature such as brochures, leaflets, sales presenters and standard advertisements. Who pays, and what is the cost?
□ How do I make sales? How do I get leads? Do you provide an initial customer base? Do I need to cold-call? Do you provide training in this area? Do I need to have sales experience?
□ Is there a centralized 800 number for the franchise? How are leads allocated to individual franchisees?
□ Is there a website promoting the franchise? How are leads allocated? Can customers buy direct from the website? If so, are franchisees recompensed for sales in their area?
□ Does the franchise carry out database-related promotions to customers? How is the database created and managed? Can franchisees choose which offers are made to which customers?
□ How soon in my investigation of the franchise can I take away a franchise agreement to review? Is the agreement negotiable? The usual answer to this is 'no', although some specific variation may be reasonable especially if it is a fairly new franchise.
□ Do you have minimum performance levels, or a minimum fee, or a minimum purchase level for goods? How achievable are they? What happens if I don't meet them? Have franchisees ever failed to meet them? What happened? How secure is the franchise tenure?
□ How is my compliance with the franchise system measured? What happens if I don’t comply? How long do I have to remedy any problems?
□ What is the term (length) of the franchise agreement? What happens at the end? Do I have the automatic right of renewal? If not, what is the position?
□ What if I want to sell my business? What is the procedure? Do I have to sell it back to you, or can I sell it externally? What approval do you need to give to a new owner? What restrictions are there affecting my right to sell the business? Do you help me to find a new owner?
□ What insurances am I required to have? Do you have an arrangement with a broker or company offering special rates?
□ If premises are required, are they bought or leased? Do you take the head lease and sublet to me, or do I lease direct? Please clarify the arrangements for this.
□ How does the length of the lease compare with the term of the franchise agreement? What happens if my lease is not renewed?
Selection & Training
□ How do you assess the suitability of individuals? Do you use any franchise-specific profiling tools tailored to your own business?
□ On what basis do you choose your franchisees? How selective are you?
□ What are the most important attributes of a successful franchisee, and do they match mine?
□ How well am I likely to fit with the organization in terms of personal standards, aspirations and values?
□ How long does the initial training last? Where does it take place? Who pays for transport, accommodation and meals during training?
□ Who conducts it and how well-equipped are they to do so? What does it cover and in what depth? What is the balance of theoretical and practical training? Is there any practical experience in company outlets or with existing franchisees?
□ Do you provide on-going training in the form of courses, workshops, conferences, seminars, regional meetings, refresher or follow-on/advanced courses? Who pays?
□ Do you provide training for any staff I employ? Who pays?
□ Where is your franchise support office based? What does it consist of?
□ Exactly what level of support can I expect? In what areas? What do they do? Is there any technical support, or on-going research and development?
□ What support would I receive during the opening period of my business?
□ What on-going support services do you provide? Do you have a program of visits and meetings to monitor progress and advise on improvements? How do you run the support function?
□ What would happen if I had operational problems that I was unable to solve? What help would I get?
□ How often would I see or hear from you? Is there any support system between franchisees? Would I receive feedback on my performance? How will I know how well I'm doing?
□ What benchmarking systems do you use? Are comparisons of performance across key areas available to all franchisees? Is there help in analyzing areas for improvement? This is a key advantage of franchises over independent businesses.
□ What would I actually be doing on a daily basis?
□ What will the opening hours of the business be?
□ How many hours will I need to work? What are the hours required outside official business hours, eg, for paperwork?
□ Is the business seasonal? When is the best time to start trading?
□ What are the most important keys to success in the business? What are the most common pitfalls?
□ Do I need to employ staff or do all the work myself? What type of people, at what cost? Are the right kind of people readily available in my area?
□ Will the business support a family, or will my partner also need to work outside the business? Is there the potential for my partner to work in the business, too? Is it preferable to be on my own or to have someone else with me?
□ How do I run the business, and where from? What premises and equipment do I need? (eg, a full retail shop-fit or a home office, vehicle and computer).
□ Do you provide operational manuals and instructions? Are these regularly updated? Are they online?
□ What systems do you have for keeping franchisees in touch with you and each other? Eg, mailings, e-mail, intranet, telephone support, personal visits, newsletters, seminars, regional meetings, conferences. How regular are these?
□ Is there a formal system for franchisees to make suggestions? Test new ideas?
□ What are relationships like between the franchisees? Between franchisor and franchisees?