What Should I Ask the Franchisor?

Questions to ask the franchisor:

  • Where will they be located? 
  • What is the success rate of existing franchises?  
  • What method is used to protect franchisees from poorly performing franchises?  
  • Is there a franchise owners association? 
  • Is there a franchise advisory council?  
  • Who owns the trademarks, service marks, etc., and are they federally registered?  
  • Are there any disputes pending or threatened against the trademark.   
  • Has the franchisor complied with the FTC and state disclosure laws?  
  • Are any senior management or key personnel leaving the system?  
  • Does this company compete with the franchisees in the marketplace?  
  • Will the franchisor finance any of the costs?  
  • Is the franchisor willing to negotiate the terms of the franchise.  

 

What is the total investment required to own a franchise?  

  • franchise fee 
  • furniture, fixtures, and equipment 
  • leasehold improvements 
  • lease deposits 
  • other deposits 
  • franchise training 
  • travel expense 
  • supplies 
  • advertising and brochures 
  • grand-opening advertising 
  • inventory 
  • pre opening staff costs 
  • working capital until breakeven 
  • working capital - living expenses 
  • other  

What are the continued financial costs, the basis used for calculation, method of payment and frequency of payment?

  • royalties 
  • advertising 

Must the franchisee purchase products or services from the franchisor?

  • Does the franchisor earn income on purchases?  
  • How much does the franchisor earn? 
  • How are the products distributed?  
  • How long does it take for the orders to be filled?  
  • What other initial or continuing services does the franchisor provide? What do these costs?  

Questions about Consumer Research and Marketing:

  • What type of consumer research has the company conducted.   
  • What were the results?  
  • Has the franchisor conducted any market studies on the territory to ensure that it can support a franchise?  
  • What are the demographics required to support a franchise?  
  • What are the traffic counts required to support a franchise?  

Questions about Training: 

  • What are the location, duration and additional costs of initial training?  
  • Who must attend the training? 
  • What is the cost of additional staff attending training? 
  • What is the training curriculum?  
  • Who conducts the training and what are their backgrounds?  
  • Who pays for transportation, room and living expenses?  
  • Does the franchisor provide training materials for training new staff in addition to the operations manuals?  
  • Does the franchisor provide hands-on assistance during the pre-opening, grand opening and initial period?  Of what type, duration and cost?

  

Questions about Products and Services:

  • Are there any new products or services under consideration for addition to the franchise? 
  • When are they going to be introduced  
  • what is the estimated additional cost for adding the new products or services? 
  • Are there any restrictions on the distribution or sale of the product?  
  • Is there a guarantee or warranty program? 
  • How is it administered and what is the cost?  
  • Is there a minimum that must be purchased?

 

Questions about Operations:

  • What are the roles and responsibilities of the field staff? 
  • How many locations does each franchise consultant work?  
  • What is the background of the franchise consultant I will be working with?  Can I meet that person before purchasing the franchise?  
  • How often does the field staff visit a franchisee's location?  
  • What is the additional cost of field services if the franchisee requires it? 
  • Exactly what kind of assistance is given? 
  • What kind of supervision or quality control is there? 
  • What, if any, is the charge for assistance?  
  • What kind of business management systems are provided to boost sales and profits?  

Questions about advertising and marketing:

  • What type of consumer advertising does the company recommend?  
  • What types of cooperative advertising programs are being used?  
  • What percentage of sales is recommended or required for advertising or marketing?  
  • How do the franchisees obtain their sales leads or customers? 
  • What is the franchisor's national/regional advertising program and budget? 
  • What portion of the national/regional advertising contribution is used for administrative/corporate/agency expenses and fees?  
  • What are the primary advertising/marketing vehicles? 
  • What is the grand opening advertising program and cost?