what to ask when buying a franchise

But assuming they adhere to the core principles of Business Format Franchising, here are a number of key operational questions to ask when buying a franchise:

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What to consider before buying a franchise?

What to Consider Before Buying a Franchise

• Make Sure Your Family is On Board. Owning a franchise—or a business of any kind—is truly a family affair. ...
• Count Your Cash. ...
• Reach Out to Other Franchisees. ...
• Do Some Soul Searching. ...
• Test the Product. ...
• Understand What You’re Getting Into. ...
• Talk to a Franchise Consultant. ...
• Come Up With an Exit Strategy. ...
• Consult With Franchise Experts. ...
• Do Your Due Diligence. ...

What do you need to know about buying a franchise?

Ten Things To Consider Before Buying A Franchise

• What's the story on the franchisor's business record and reputation?
• Have you spoken to existing franchisees?
• Have you contacted government consumer protection agencies, Canadian Franchise Association and your local Better Business Bureau?
• Is the franchisor's infrastructure comprehensive and stable?

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What are the pros and cons of buying a franchise?

The Pros and Cons of Buying a Franchise: Is it Right for You?

• Advantages of Franchising. Advantage 1: Explore a New Career, Work in a New Industry! ...
• Disadvantages of Franchising. Depending on which franchise you choose to invest in, the initial investment can be hefty, especially for big-name franchises.
• Overlooked Realities of Franchising. ...
• Advantages and Disadvantages of Buying a Franchise. ...

How to start selling a franchise?

• Franchise Advertisement Compelling Message Attractive Branding Interesting Business Idea Clearly Display Cost and Investment Required
• Information Request Sent To Us
• Auto Responder Email Sent to Prospect Further builds message about your franchise Further Qualifies in who we are looking for and what is required to qualify for the Franchise. ...

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What questions should I ask a franchisee?

Some of these questions are:How long have you been in business?What made you choose this franchise?How would you rate your relationship with the franchisor?How would you rate the initial training?How would you rate the marketing programs?Are you aware of any franchisees who are unhappy in this business?More items...•

What question should you ask yourself before opening a franchise?

Questions You Should Ask Yourself Before Becoming a FranchiseeDo you want to manage and operate a business — regardless of whether it is an independent business or a franchise?Do you always have to be right? ... Do you have the need to experiment with your products and services?More items...

What things should you consider when acquiring a franchise?

7 things to investigate before you buy a franchiseLearn everything you can about franchising. ... Understand the franchise agreement. ... Read the disclosure statement carefully. ... Identify your financial risks. ... Understand your territory. ... Consider restraint of trade. ... Find out if there are ongoing fees.More items...

What is a reasonable franchise fee?

Franchise fees are typically between $25,000 to $50,000 on average. 2) Startup Costs: These are the expenses you'll incur to get your new business open and operating. Initial investment costs vary widely from franchise to franchise.

How do I prepare for a franchise interview?

How to Prepare for the Franchise InterviewBe Aware of Potential Challenges. Do your homework. ... Analyze Your Financial Situation. ... Talk to Current Franchisees. ... Questions for the Franchisor. ... A Mutually Beneficial Relationship.

How do you ask for franchise information?

Exploring a Franchise Opportunity? 5 Key Questions to Ask.How does this franchise work? ... What training and ongoing support is provided franchisees? ... What is the company's competitive advantage? ... Does the company have a standardized operating system? ... What's the real cost of buying this franchise?

What are three 3 points that should be considered prior to buying a franchise?

What Should I Consider Before Buying a Franchise?The type of experience required in the franchised business.The hours and personal commitment necessary to run the business.The track record of the franchisor, and the business experience of its officers and directors.How other franchisees in the same system are doing.More items...

How do franchise owners get paid?

How do franchise owners get paid? Franchise owners can pay themselves a salary or depending on their business entity, they may be able to take a draw from their accumulated equity.

What are the disadvantages of owning a franchise?

Buying a franchise means entering into a formal agreement with your franchisor. Franchise agreements dictate how you run the business, so there may be little room for creativity. There are usually restrictions on where you operate, the products you sell and the suppliers you use.

How do you negotiate a franchise agreement?

8 Things to Consider When Negotiating a Franchise AgreementFirst of all, never sign any agreement without negotiating. ... Negotiate extensions. ... Your right to obtain waivers in the event of the franchisor's company-wide decisions. ... Make sure that all fees are disclosed. ... Have as few requested changes as possible.More items...•

What is a typical franchise agreement?

A typical franchise agreement contains. Franchise Disclosure Document (FDD) Disclosures required by state laws. Parties defined in the agreement. Recitals, such as Ownership of System, and Objectives of Parties.

Do franchises pay taxes?

Franchise taxes are paid in addition to federal and state income taxes. The amount of franchise tax can differ greatly depending on the tax rules within each state and is not calculated on the organization's profit. Kansas, Missouri, Pennsylvania, and West Virginia all discontinued their corporate franchise taxes.

What questions should a business owner address before trying to enter franchising?

Sample questions to ask a franchisorWill the franchisor help me find a good location? ... Can you tell me more about your training program? ... Can you provide extra financial assistance? ... How are disagreements resolved? ... Other Articles From AllBusiness.com:What's a typical day like for your franchise?More items...•

What important questions should you ask before becoming a franchise in a company like Sonic?

Five Questions to Ask Franchisees Before You Become OneHow well did your first unit opening go? ... How well do the marketing programs work? ... How well does everybody get along? ... How much money can I make? ... If you had it to do all over again, would you still buy this franchise?

What are the key questions to be assessed by the franchisee in evaluating the franchisor?

What to consider when evaluating a franchise opportunityThe market. Has a defined market been determined? ... Company history. ... Financial statements. ... Level of investment. ... Training and support. ... Territory. ... Royalties. ... Restrictions.More items...

Is becoming a franchise worth it?

If you're a fledgling entrepreneur or a seasoned business person wanting to diversify your holdings, you've probably wondered, “Are franchises a good investment?” The simple answer is yes, especially if a great opportunity presents itself. There is an obvious appeal to starting a business via buying a franchise.

How long does it take to become a franchisee?

Try to balance your inquiries between new franchise owners and those who have been in the system for some time. It may take six months to a year to become a mature franchisee, therefore you may get entirely different answers ...

What is a franchise disclosure?

Franchise owners can provide the real story on what your life could look like when you buy a franchise. The franchise disclosure document you received from the company has a section containing the names, addresses and phone numbers of owners at the time the document was printed. In addition, you need to ask the company for a list ...

What to do if you are speaking with a disgruntled owner?

If you sense you are speaking with a disgruntled owner, ask tactfully what they feel specifically is wrong. Once you have contacted a large percentage of owners, you'll have a lot of notes to compare; if you sense negative trends, it is sufficient reason to raise a relevant question with the franchisor.

Do franchise owners have to speak to you?

Keep in mind two points: (1) There is really no obligation on the part of the franchise owners to speak to you; and (2) They are independent business people with businesses to run... keep your time as brief as possible, and call during normal business hours. Tell them who you are and why you are calling, and ask if there is a better time ...

How much do I need to invest to open a franchise?

How much do I have to invest before I can open my doors? The initial investment for starting a franchise can vary from a few thousand dollars to more than a million. Item 5 of the Franchise Disclosure Document (FDD) lists the initial franchise fee, and Item 7 details additional start-up costs such as real estate, equipment, licenses, etc. Be sure to discuss these items in depth with the franchisor so that you have a clear understanding of your investment and what you will need financially to get up and running.

What should be included in a franchise investigation?

Every franchise is different and it’s important to know exactly what you’re buying into. A thorough investigation should cover all aspects of the franchise system and include information from the franchisor, past and present franchisees, and third-party sources. Download our free 'Minimizing Risk' e-book for more ways to mitigate your risks when buying a franchise.

What is the importance of having a discussion with a franchisee?

It’s important to have a discussion with the franchisor to gain a clear understanding surrounding what is required of you as a unit operator.

Can a franchisor predict your success?

Though a franchisor can’t predict your individual success, they should have a good idea about what a typical franchisee earns and your income potential. Be aware that the franchisor may offer information regarding gross sales which don’t include expenses for rent and other operating costs.

Can I speak with current franchisees about their experience?

Franchisors are required to disclose the contact information for both current and past franchisees. Speaking with both can give you an honest perspective on how the franchise system operates and its pros and cons. Be very cautious of any franchisor who tries to discourage you from reaching out to other operators.

What questions should a franchisor ask?

The franchisor will ask you questions about your background and goals, if you have any existing experience in the industry, your plans for building a customer base and financing the franchise, and your exit strategy. While it may seem like a lot of questions, this is all about getting to know you in order to establish a relationship together.

What is a typical day like for a franchise?

1. What’s a typical day like for your franchise? The franchisee will be able to offer insight into the day-to-day operations that come with running that franchise, including success stories, challenging moments, and how much hard work, time, and energy will be spent on the business.

What happens if a franchise is terminated?

If the franchise is terminated by the franchisor, you must ask about your remaining obligations to the franchisor. As an example, if you wanted to open up another franchise, your contract may restrict the location and industry for the franchise.

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Opinions expressed by Forbes Contributors are their own.

Will the franchisor help me find a good location?

Will the franchisor help me find a good location? Depending on where you want to open your franchise’s doors, the franchisor should have an understanding of the best sites available in a particular area. They also may be able to help you pick the best site for your franchise and, if need be, assist with lease negotiations.

What to talk about before signing a franchise agreement?

Also, before signing a franchise agreement, talk with your spouse and anyone else who will be affected by your decision and make sure they understand the commitment necessary to get a business off the ground.

How to validate a franchise?

Another way to validate franchsies is reviewing satisfaction reports that FBR compiles for top brands. These reports offer deep insight into franchisee survey responses across several categories. Looking at aggregate response data in combination with speaking to individual owners is an effective way to vet brands before buying.

What is the final step in the research phase of your franchise journey?

The final step in the research phase of your franchise journey is speaking with other franchisees. As Cindy and Phil Bacon, franchisees of FASTSIGNS said, “Do your due diligence and contact as many franchisees as possible.” Current franchisees can be the best sources for unbiased and unfiltered information and can help you validate or invalidate the franchises you are considering.

Why is franchising important?

Franchising offers an exciting opportunity for eager entrepreneurs who are interested in running their own business but are hesitant about starting from scratch. Buying a franchise often comes with less risk than a traditional startup and offers franchisees an accelerated path to profitability.

Why is it important to ask franchisors the right questions?

Asking a franchisor the right questions in the right way is critical to learning more about the brand and whether it will be a good fit for you. The trick is to ask open-ended questions that will really make franchisors think before they answer.

What is franchising beauty?

This established system is the beauty of franchising as it offers reduced risk, streamlined business operations and a quicker runway to profitability. But in order for the system to work franchisees must fully comply with and follow the system laid out by the franchisor.

How long does a franchise contract last?

Franchise agreements may run for as long as 20 years. Renewals are not automatic. At the end of the contract term, the franchisor may decline to renew or may offer a renewal that doesn’t have the same terms and conditions as your original contract.

Why are franchises closing?

Even the best franchise brands have closed locations for one reason or another. In some cases, it's the franchisee's fault. Maybe they didn’t have the proper skill set or follow the system. In other cases, it's the franchisor's fault. It could be a bad business model or insufficient training. No one goes into business to fail, so it's important to examine a brand's failures no matter who was at fault.

What is a franchisee's territory?

A franchisee's territory is the area in which the franchise can operate. Territories vary depending on the brand and customer base. Some, such as senior care franchises, might determine a territory based on the senior population in the area. Others, such as gyms and food franchises, might set a location based on a fixed radius.

What is Forbes Business Council?

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

What does knowing how things went in the worst of times give you?

Knowing how things went in the worst of times will give you insights into how things might go in the best of times — or in the event of another crisis.

Do franchisors need to be trained?

Although all franchisors will train you and give you a system to follow, some require a specific skill set. If the franchisor tells you that you will need to network and build relationships in your community, it means you will have to spend time connecting with people at local networking groups to build a clientele. It also means some sales skills are needed. Not for you? Then maybe it's time to move on. If the franchisor says you should have team-building skills, take it seriously. If you prefer working solo or don't like delegating, you should look elsewhere.

Why do people buy franchises?

For many people, buying a franchise provides a way to fulfill their lifelong dreams of achieving and exceeding their financial and lifestyle goals. . Truthfully, owning a franchise can totally change your life and provide you with the dream life you’ve always wanted, provided you find the right franchise that leverages your skills, abilities and interests.

Why is it important to know your franchisor's financials?

It is important to get a sense of how strong your franchisor is financially, because you’ll be relying on them for long-term support. Most jurisdictions have franchise legislation that requires disclosure of current financial statements, so take this to your accountant and get them to review it and offer comments/observations.

How to do good franchise research?

To this end, one of the most effective ways to do good franchise research is to contact existing franchise owners by phone-and talk to them. Ask these franchisees lots of questions. But not just any questions.

How to call franchisees?

1. Have a printout of the questions in front of you before you start calling franchisees. I know this one sounds obvious, but because you have a lot on your mind, you may forget to print the questions out. 2. Know who you’re going to call before you start the process.

Can you call franchisees who have businesses in your area first?

3. As much as you’re tempted, don’t call franchisees who have businesses in your area first.