With the Right List of Questions, You Can Find Out What You Want to Know About a Prospective Franchise
Even if you haven’t quite narrowed down the list of franchises that you want to invest in yet, it is worth being prepared for when you get invited to a franchisor's discovery day. This event allows you to go to the franchisor's corporate headquarters and meet with them to learn more about the franchise. After meeting with them and speaking with other franchisees, you should have all the information that you need to decide if the franchise is right for you
To make the most of your discovery day experience, it is important that you come prepared with specific questions. Instead, these questions should get you the remaining information you need to know before making your investment.
Here are some questions to ask at a franchise discovery day:
How is the Franchise Going to Support Me?
A major benefit of owning a franchise is that the franchisor will provide you with all the support and training you need to run the business successfully. Franchisors typically help franchise owners with site selection, site construction, providing them with an operations manual, and more. It is also good to know how the franchise will help you after your location opens. This includes ongoing training for managers and staff.
How Long Will it Take to Become Profitable?
Since owning a franchise may be the biggest investment you will make, it is crucial to know how much you will earn. This information will likely be shown in item 19 of the franchise’s Franchise Disclosure Document (FDD). Including an item 19 is a way that the franchisor can be transparent with you and allow you to understand the franchise business' earning potential. Ask the franchisor about their item 19 if they have one, how long it will take to make a return on your investment (ROI) and any associated costs.
What is Your Relationship Like with Your Franchise Owners?
It is important that you work with a franchise that has an easy and personable franchise team. Part of the due diligence process is to speak with other franchise owners to see how they feel about working with the franchise’s team. By asking this question at the franchise discovery day, you can figure out if this franchise is ideal for you.
How Does This Franchise Compare to the Competition?
In all franchising opportunities, there is serious competition. Franchisors have to differentiate their franchise businesses from the rest in order to be one of the most profitable franchises in the industry. With so many franchising opportunities to choose from in any category, you’ll want to invest in the franchise business that gives you the best chance of success. This could be offering a lower royalty fee or better vendor discounts in comparison to other franchise businesses in the industry. This is very attractive to a prospective franchise owner.
Use this discovery day experience to ask the franchisor how they plan to stay ahead of the competition and where they position themselves within the industry. You want to work with a franchise that is ahead of the curve!
Are You Looking to Expand the Franchise Business?
It is important to know where the franchisor is looking to take their business long-term. Is the franchisor planning to bring the business across the country and internationally? Do franchise owners in the system have opportunities at multi-unit ownership? The franchise should always be improving.
Have You Ever Terminated Franchisees?
While the franchisor-franchisee relationship usually goes well, there are times when it does not. Does the franchisor have contentious relationships with other franchise owners? If so, why? Why were they terminated? To avoid being terminated, you need to pay your franchise fees on time; follow the system that is provided to you; behave professionally and properly while at work; keep the business financially successful; and don’t neglect the franchise store by refusing to open the doors, for example.
Do You Get a lot of Complaints from Franchise Owners or Customers?
It is important to know how the franchise handles complaints from franchisees and customers alike and what they do to address them. It is good to know if the franchise will take your complaints seriously and work to fix them.
What Happens if I Sell the Business and Leave the System?
When evaluating a franchise opportunity, having an exit strategy is essential. Some franchisors help you with a franchise resale, which will save you time and money from having to hire a third-party. Ask the franchisor if they will help you with the resale so you know if you have to look elsewhere for help when the time comes to sell it. Depending on the franchise business, your exit strategy may have specific restrictions but there are several ways to leave a franchise system. You can sell the business to an exciting franchise owner; engage in a resale when you sell it to a new franchisee; speak with a franchise consultant to help find quality and qualified prospective candidates; or you can also pass the franchise business down to a family member. Asking the franchisor what to do if you leave the franchise system is an important step to long-term planning as a franchise owner.
Do You Offer Financing Options?
Purchasing a franchise can be a costly investment. To make this investment easier, the franchise may offer financing options that will allow you to take out loans to buy the franchise. These financing options typically cover construction costs and more. If the franchise doesn’t offer their own in-house financing options, look to the U.S. Small Business Administration to find out your funding options.
Will My Territory Be Protected?
Most franchises offer protected territories, meaning that you are the only one who can own a franchise location in that area. This will decrease your competition and increase the likelihood of the business succeeding.
How Many Revenue Streams are Available?
An attractive aspect of being a franchise owner is that you can have multiple streams of revenue and can own more than one franchise store. For example, with a fast-food restaurant, you can own more than one location and have multiple ways to bring income to your franchise business. You can offer delivery services, catering, and curb-side pick-up options Which adds revenue to your franchise business.
Are There Conferences for Franchisees?
One of the benefits of owning a franchise is that you can attend conferences to meet up with colleagues and discuss best practices and trends in the industry. Not only does this build comradery within the franchise system, but you can implement new ways to run your business even better. The franchisor has the opportunity to show how much they value the franchisees in the system by getting them together in a fun, casual environment that allows them to mix business and pleasure a bit. Conferences entail presentations, speeches, and more to reinvigorate franchise business owners about the future of the brand and industry.
What Are Your Values?
There are several innate qualities that you need to have to be a successful business owner. These include: hard work, dedication, perseverance, and being community-oriented. But its value alignment that can make or break your decision to buy a franchise. Does the franchisor have faith-based values? Do they value community involvement? Do they value diversity and have DEI initiatives? All of this needs to be considered before owning a franchise.