Key Questions to Ask When Buying a Franchise

When doing your research on purchasing a franchise, the questions you ask current franchisees could be very informative. These professionals have done what you’re looking to do, so their opinions are invaluable.

Some franchisors encourage or require you to speak with current franchise owners to get an in-depth perspective on the industry and what it is like to be part of that system. If the franchisor you are interested in requires you to have such conversations with its franchise owners, it’s a positive sign for you as a prospective franchisee.

No matter how much research you do on a specific franchisor, it’s impossible to fully understand what you will experience without hands-on involvement. However, the next best thing is having honest and thorough discussions with those who have that experience.

Pro-tip: Focus on how the franchisees view the franchisor based on the last 2-3 years.

This will give you the most accurate barometer of your potential success in the franchise system.

Before you enter the world of franchising, it’s also important you assess your needs and whether they align with those of a franchisor. While you gain a lot of support, instant brand recognition, and a competitive advantage, as a franchisee, you will not have full reign over certain aspects of the business. Here are some questions to ask yourself to help you determine if you’re ready to be a franchise owner:

1. Am I excited to follow a proven business model and have support?

2. Do I have the necessary financial resources to make the initial investment?

3. Am I passionate about the franchise’s industry, its products or services?

4. Can I commit the required time and energy it takes to make the franchise successful?

Questions to Ask the Franchisor

 

Next, you’ll want to learn whether the franchise you’re interested in is able to help you achieve your entrepreneurial needs and aspirations. It’s important to frame the discussion around what current franchisees are doing and what support they are getting from the franchisor.

1. What is the initial franchise fee and what startup costs should I budget for?

2. Can you provide detailed information on ongoing fees, including royalties and advertising costs?

3. What kind of training and support do you offer to new franchisees?

This is the most important question you should also ask current franchisees. One of the main reasons people choose to invest in franchises is for support. An independent business owner must face the world on their own, but franchise owners have the benefit of support from the franchisor. You should inquire regarding support for training, marketing and operations.

4. Are there exclusive territories for franchisees, and how are they determined?

5. Can you provide earnings claims or any financial performance representations?

6. How long has your franchise system been in operation, and how many franchised units are currently active?

7. How often do you update your franchise model and how are franchisees involved in these changes?

The world does not stand still. Neither should your franchisor. The best franchisors are highly communicative, and forward looking, and focused on implementing new and impactful services and programs for the benefit of their franchisees.

Examples of new programs could be new property technology, certification programs or innovative email campaigns.

8. What is the process for renewing the franchise agreement, and are there any fees associated with renewal?

9. How do you handle conflicts or disputes with franchisees?

10. What kind of marketing and advertising support do you provide?

11. How has your franchise grown historically, and what are your future growth plans?

12. What is the success rate of existing franchises?

Questions to Ask the Franchisee

To get the most honest and transparent perspective of a franchise, you should talk to current franchise owners about their experiences. Unlike traditional company hierarchies, franchisees pay royalties to their corporate offices – giving them a stake in the game. In other words, franchisees are allowed to speak openly about the quality of service and support they are receiving from their franchisor.

1. How long have you been a franchisee?

One of the first questions to ask current franchisees is just how long they’ve been running their business. If someone has been running a licensed location for a long time, it’s a good sign that the business model is durable.

About half of all new business ventures end in failure within five years. This doesn’t mean you should avoid a franchise if the owner you talk to hasn’t been operating for that long. They may be well on their way. If you speak to multiple franchisees who have been operating for varying number of years, it’s a good indication that success is on the horizon.

2. Is there initial and ongoing training?

3. Is the franchisor forward looking and introduces new programs and services to help its franchisees grow and adapt to market changes?

4. What level of support do you receive from the franchisor?

5. What were your initial and current gross revenues, and how long did it take to become profitable?

6. Did you encounter any hidden fees?

7. Can you say with confidence that the franchisor invest in training and certifications?

8. Does the franchisor have an in-house learning platform through which you can gain ongoing training?

9. Can you give me examples of recent initiatives from the franchisor to help franchisees with training?

10. Do you feel that your franchisor understands the importance of marketing on behalf of its franchisors?

11. Does the franchisor understand how to do social / digital marketing?

12. Are you satisfied with the digital / social media marketing by the franchisor?

13. Does the franchisor support print marketing, and provide access to branded apparel and promo products?

14. Do you get access to all operational systems to run your business?

15. Do you get technical support from your franchisor?

16. Is the franchisor responsive?

• Empathetic?
• Collaborative?

The average franchisee fee in America is about $20,000 or $35,000. This can vary significantly, but the most important thing to know is if this number includes all costs or if you’ll be expected to pay more out of pocket for things like training and marketing. Whether this occurs within the franchise is one critical piece of information that prospective franchise owners don’t hear nearly as often as they should. Expecting to pay one price and then getting hit will additional costs is not a good way to start a business.

Is There Anything Else I Should Know?

By asking questions to current franchise owners, you’re preparing yourself better for success. The people you’re talking to are your potential future colleagues. After discussing the topics listed here, be sure to ask if there’s anything else you should know. You might end up learning something that helps you make the best financial decision of your life! 

If you’re ready to invest in a home inspection franchise that will change your life, the experts at WIN Home Inspection can help you contact current franchise owners to learn more. You can get in touch with us by filling out this contact form, calling us at (800) 967-8127 or emailing franchising@wini.com today.