Buying a franchise? How to know if it’s a good fit
Category: Buying a Business
Imagine: you and your franchise consultant have identified some franchise opportunities that might be a great match for you.
These opportunities look good on paper, and you’re ready for the next step: talking to the franchisors. You’re so close to becoming your own boss.
Before you reach for the phone, you should prepare. This conversation is something like a cross between a first date and a job interview. You want to find out if the company is a good match for you while showing the franchisor you are interested, enthusiastic, smart, and capable.
Research before interviewing franchisors
Before talking with a franchisor, read the franchise company’s Franchise Disclosure Document (FDD) and do extensive research on the franchise.
Talk with your franchise consultant about things like the company’s history and projections for the future; market share; and the local market for that kind of business.
In the call, take your time to answer the franchisor’s questions thoughtfully and honestly. Establish yourself as a strong candidate they want to know more about.
It’s important to come equipped with some questions of your own. Write these down so you don’t forget them.
Questions to ask franchisors
About the company
- Who is your customer?
- What is outstanding about the product or service you sell?
- What is the CEO’s outlook for the company?
- Why are you in business?
- Why is your company successful?
- What are the company’s long-term goals?
About the competition
- What makes your company different from competitors?
- What are you doing to successfully compete?
- What can be done in the future to guarantee the company’s success?
- What does the competition do well? Is that a point you compete on, or do you differentiate by excelling in a different area?
About marketing
- What is the company’s marketing and advertising strategy?
- Who is the advertising agency and why did you choose them?
- What kind of advertising or marketing support is available to franchisees?
About finance
- Has this been a good year for the company?
- How has the company been faring amidst the current economic conditions?
- How have you supported franchisees through economic downturns?
- How has the pandemic affected your company?
About location
- Should we move forward, do you have a possible location in mind for a new franchise? Why that location?
- What geographic areas are you expecting to see growth?
- What areas do you think are already saturated?
About franchisees
- What makes for a successful franchisee in your company?
- Describe your training program for new owners.
- Describe training for new hires.
- What kind of support do you provide new owners after the location opens?
- Do you offer financial assistance or help obtaining financing?
- How are disputes between franchisees and the company handled?
- What is the worst mistake a franchisee could make?
- What is the biggest disaster the company has ever handled? Why did it occur, and what did the company learn from it?
You don’t need to ask every question on this list, and you shouldn’t fire off questions in rapid succession. Choose the questions you believe are the most important. Ask your franchise consultant to weigh in on what they think is most important to learn on the franchisor call.
