Evaluating & Buying a Franchise

What Questions Should I Ask the Franchisor?

How Do I Find the Right Franchise?

A major focus of this interview should be determining whether or not the franchisor genuinely cares about the success of his or her franchisees. If this is the case, it bodes well for both the franchisee and the franchisor.

The best manner of obtaining candid information on how well a franchise organization operates in conjunction with its system owners is often said to be derived through conducting extensive interviews with a wide range of existing franchisees that are operating under the common brand name. By asking the right questions in the right way, a prospective franchisee investor is able not only to get invaluable insight into the relationship between the franchisor and the franchisees, but he or she is also able to get one of the most accurate figures on projected revenues, thereby solidifying an estimate on the rate of return possible from a single investment.

Indeed, this stage of the research is indispensable, yet while the value of franchisee-based independent investigation is a well established fact and actually accounts for a vital stage of the investigative process it is not the end of the story.

That's because, at one point, the prospective franchisee will have to go over a series of intensive questions with the franchisor itself. While there are a variety of topics that are needed to be touched upon, it may be hard for some to demand these straightforward facts from an intimidating management type. Yet maintaining ones composure throughout the interview is of the utmost importance. Many franchisors are intent on winning potential investors over, and they may employ any of a variety of tactics while meeting with potential franchisees. While giving way here and there is advisable in order to keep the conversation flowing, don't let this stop the serious from being asked. After all, there's no reason to be nervous or distracted from the purpose of the meeting - you're the one with the money to spend.

While not all franchisor companies may be the most forthcoming, the interview at least gives the potential franchisee the chance to see to that he or she has covered the basics in terms of clarifying certain issues and - quite importantly - getting the owner's responses down on the record to compare against possible discrepancies to be made in the future.

One of the more important of the financial questions that need to be asked pertains to the initial capital investment. Ask the franchisor what, exactly, will be needed after the basic investments and the initial fee. Knowing this sooner, rather than later, can save time in the investigative process and is definitely crucial to know before being struck with major unexpected expenses.

Another fundamental issue is franchise territory. Now, a franchise territory is essentially an area of land designated by the franchisor for development. There are various restrictions placed on the land that include a limit to how many stores can populate a given piece of territory. This is a logical restriction as it is designed to avoid in house competition. But it is necessary for the prospective franchisee to find out exactly what restrictions are in place. Also, each territory comes with a certain amount of protections from the franchisor. Find out what these are as well.

In order to determine the potential for success, it is important for the prospective franchisee to get a figure on how many franchises have been sold in the area - or state even - within the past 10 to 14 months. Also, find out how many franchisees in the system have opened up in the same span of time. The answer to this question can play a vital role in determining the company's rate of growth and the viability of the individual store operations.

Additionally, the prospective franchisee would be well advised to find out as much as he or she can about the level of support that the company would provide. While initial support is very helpful, it is really the level of ongoing, continual support quality that differentiates the lower grade institutions from the strong and thriving franchise organizations.

Indeed, while there are undoubtedly a series of important technical questions that must be asked by the investor, what he or she is really looking for is a franchisor that can be relied upon. A major focus of this interview should be determining whether or not the franchisor genuinely cares about the success of his or her franchisees. If this is the case, it bodes well for both the franchisee and the franchisor.