View Full Version : What are the key questions to ask a franchisor?
What types of questions should you ask a franchisor prior to purchasing the franchise?
12-22-2006, 06:43 AM
I think the most important thing you can ask for from a franchisor is references. But I would not stop there if you look in the UFOC you can see lists of other franchisees or you can search online and find additonal one. It is best to open your conversation with franchisees that you find on your own with something like "You were not one of the names that the franchisor provides but I wanted to have a confidential conversation with some other franchisees..." You are bound to get more information if you frame the question this way. You will get better information to help make your decision from a franchisee than a franchisor.
I was googling after I aske the question and I found this set of legal questions that I thought the members would be interested in:
Help w/ Acquiring a Franchise-Articles-Key Legal Questions To Ask (http://www.franchise.org/FranchiseeSecondary.aspx?id=10006)
Here are some questions you might like to ask. Remember that there are many types of franchises and you may have to adjust the questions to suit the specific franchise opportunity you are enquiring about.
What are your long-term plans for improving your company?
Do I have to pay a deposit or upfront payment, and if I do not proceed will I lose my deposit or any part of it? (See Item 5 of the UFOC)
How much working capital do you think I need, and what help can you give me in estimating my projections? (See Item 7 of the UFOC)
How long will it take to start trading from the time I sign the contract? (See Item 11 of the UFOC)
What will the training consist of, how long will it last and are all training costs included in my franchise fee? (See Item 11 of the UFOC)
What is my expected break even and how long should it take me to reach this figure? (US Franchisors do not normally make projections and/or earnings claims without providing an Earnings Claim Document)
Do you charge ongoing franchise fees and if so what are they and how are they calculated? (See Item 6 of the UFOC)
Do I have to contribute to any other costs such as advertising and promotional expenditure that you incur, if so how much? (See Item 6 of the UFOC)
What help, if any, will I receive if I want to do some advertising and promotion on my own? (See Item 11 of the UFOC)
After I have opened my franchise, what ongoing support will I be provided with? (See Item 11 of the UFOC)
What help and guidance do you offer in finding the right site? (See Item 11 and Item 12 of the UFOC)
Can I be provided with a full list of all franchisees in the franchise network and can I contact them? (See Item 20 of the UFOC)
Do you provide instructional and operational manuals and can I see them prior to signing? (See Item 8 and Item 11 of the UFOC)
Have any franchisees failed, and if so why? (See Item 20 of the UFOC)
How many franchisees will you have in 5 years? (See Item 20 of the UFOC for estimates of the next 12 months)
How thoroughly do you vet prospective franchisees to maintain a high standard in the franchise network? (Confidential Questionnaire and Interviews between franchisor and prospective franchisee)
Will the territory offered be for my sole and exclusive use? (See Item 12 of the UFOC)
Are you currently operating in areas with similar demographics as my proposed territory? (See Item 12 and Item 20 of the UFOC)
How do you handle grievances with existing franchisees? (See Item 17 of the UFOC)
Does your company see any threats in the current marketplace? (See Item 1 of the UFOC)
What do you do for your franchisees that your competitors donít? (Review UFOC)
Thanks SBA that was a helpful post especially because it ties back to the UFOC.
Ya thanks these are great questions.
01-27-2007, 09:05 AM
SBA has provided some excellent questions and as is pointed out, the answers can be found in the UFOC.
There are additional questions that deal with day to day issues, training, site location and such, that are not dealt with in the UFOC and you may not think of unless you've previously owned a franchise or business. As a franchise owner, I cover these issues in one of several manuals included with my start up kit found below.
You are wise to go in with your eyes wide open and armed with detailed questions.
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